These days I'm hearing more, and more about "Short Sale".What exactly is the definition for "Short Sale"? Read the following: Real Estate Short Sale Definition , and What does a Bank Approve, by: Rae Cantanese, Realtor.
Real Estate Short Sale Definition:
by Kofi Bofah, Demand Media, San Francisco Chronicle.
As a distressed homeowner, you may look to a short sale as a means to avoid foreclosure and further losses. As a buyer, you may evaluate short sales as opportunities to acquire affordable real estate. Third-party lenders, however, add an extra wrinkle to real estate short sale transactions, as they are motivated to maximize the selling price. Familiarize yourself with the terms and conditions of a short sale before exploring these deals as part of your own strategy.
Identification
Real estate short sales occur when a home is bought for less money than its total outstanding mortgage balance. The buyer, seller and lender must all agree to terms in a short sale. The bank is especially critical to this deal, because it must be willing to settle for less money than it is owed.
Features
Borrowers often arrange for short sales during preforeclosure. In preforeclosure, a homeowner has defaulted on the mortgage loan but has yet to be evicted. Mortgage loans fall into default after 30 days of missed payments. Following 180 days of missed payments, Investopedia says that lenders file a notice of trustee’s sale within the local newspaper. The notice of trustee’s sale announces a foreclosure auction sale, after which a homeowner is evicted. A professional appraiser is hired to value the home prior to the short sale. The appraiser should confirm that the home is actually worth less than its mortgage balance. Property values usually decline amid recession, when unemployment is high and real estate demand is weak.
Considerations
Compared to foreclosed properties, short-sale homes are in relatively good condition. In foreclosure, angry evictees may take out their frustrations on their former home and purposefully damage its walls, fixtures and appliances. After these people are evicted, the home could sit vacant for several months. At this time, neighborhood criminals may break into the property and strip it of valuable metal piping and electric wiring. During a short sale, however, the homeowner still resides at the property and is encouraged to make a good presentation to close the deal. Be advised that buyers may need to spend money on small repairs, because distressed homeowners often lack the financial resources to devote to general maintenance.
Benefits
Short sales allow banks and homeowners to avoid the time and expense of foreclosure deals. In foreclosure, banks spend money on eviction and court costs. Further, banks may be forced to offer significant price reductions to attract buyers to a foreclosed property. With a short sale, homeowners can guard against doing further damage to their credit profiles. According to Experian, a foreclosure will remain on a person’s credit report for seven years.
Warning
For buyers, short sales are inconvenient transactions. Buyers must consult with a complex network of homeowners, attorneys, real estate agents and bank officials. According to Investopedia, it may take several months for the bank to respond to an offer, if it responds at all. Banks and sellers, however, face opportunity cost risks. Opportunity costs describe foregone profits that may have materialized, if the home were to begin appreciating in value.
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What Does a Bank Approved Short Sale Mean?
by Rae Catanese
in Selling Home as Short Sale, Short Sales Tampa
Great question from one of my buyers. Don’t be mislead when purchasing a short sale…
When a short sale says “Bank Approved” does that mean it is an easier process than a traditional short sale?
It could be a shorter process but there’s no guarantee. I always ask the Realtor to supply written documentation of the approved price. If they can’t, then I don’t believe the process will be any shorter. What happens is that the home had a contract at one time. The bank took so long to get back to the buyer that the buyer found something else and walked away from the deal. The only good news is that the Realtor will then at least know what the bank is willing to accept for the home and then they advertise that price as being “bank approved”. I’ve had bank approved short sales take 4 months to get a response because the approval price is only good for 30 days, or so. (depending on the bank)
It’s very misleading to the buyers to say a price has been approved by the bank. It may have been approved at one time…….but if you have to start the short sale process all over again what good is it?
Purchasing or selling a home as a short sale is a difficult process that requires in depth knowledge of our market here in Tampa. Whether you hire me or another Realtor to represent you, make sure you have someone to help guide you through the process. We are also seeing short sale scams that entail multiple buyers for the same property.
You may contact Char @ buyandsellwithchar@gmail,com, or Rae Cantanese, Realtors.
