Short Sales Explained
Definition: Simply put, a Short Sale occurs when a homes market value is less then the noticeable mortgage debt plus sales costs (sometimes called an upside down Mortgage. The mortgage bank(s) must agree to write-off a portion of the noticeable loan debt resulting in a short payoff.
Short Sale Example: For example, if a home is currently worth, and sells for $400,000 with $20,000 in total sales costs, and the total noticeable loan balance is $680,000, then the lender(s) would have to agree to reduce the mortgage loan debt by $280,000 in order to allow the short sale escrow to close. At the close of the Sales transactions, the homeowner is debt free and incurs no cost of sales, for we insure the fee’s and expenses are paid by the bank.
Why Would a Mortgage Bank Consider a Short Sale? Lenders often entertain such an option for in the long run, they will usually receive a higher percentage of their principal back as compared to forcing the character into Foreclosure. In a Foreclosure the bank always looses more money, the Mortgage Bank runs the risk of character neglect or damage, and additional delays and costs, and as edges dump the foreclosed homes on the market at below market values, this in-turn reduces market values already more. Your Lender does NOT want to foreclose, most lenders have been overwhelmed by the huge numbers of foreclosures and doing a short sale saves them money.
Today, California lenders won’t commit to a Short Sale until their is a valid and firm buy offer in hand from a qualified new buyer, and a knowledgeable broker/agent who can negotiate the deal. It’s imperative to work with an experienced short sale specialist for they will need to prepare a specialized and complete package. An incomplete packet or poorly put together packet only delays the already slow short sale course of action.
Why Should You Consider a Short Sale?
* If you purchased you home between 2001 – 2007 you most likely have zero or negative equity.
* Projections are that it will take 10 – 15 years before we reach peak values of 2006. So if you plan/need to sell you home before 2020. You will have to pay the difference out of your pocket.
* After December 31st 2012 you will have to pay taxes on loss. See Debt Relief Act or 2007
* Increase you net worth immediately by $10,000 – $300,000. This will vary depending on the amount of you negative equity.
* Less damaging to your credit when compared to a foreclosure.
* You can buy a home in 18 – 24 months. If you are current you may qualify of a little know short sale and buy program. (call for more information).
* Your lender may pay you $3000 – $5000 for a relocation expense if you complete the sale.
* It is FREE the lender pays ours fees
* But most of all give you peace of mind so you can move on with other important things with your life. This is what we hear most from our clients that have used our serviced to do a short sale.
How is a Short Sale Negotiated with a Mortgage Bank: Short Sales are one of the most difficult and complicated residential transactions. Compared to a normal sale, these transactions require additional paperwork, complicate negotiations with the mortgage banker(s), and careful preparation of the time of action and buy offer. The package typically includes: a buy offer contract, buyers loan qualifications, a realistic and detailed examination of the fair market value of the home, current local real estate market conditions, seller financial information, seller hardship letter and more. We then call twice a week to ensure you short sale is being reviewed. We meet the lender appraiser at the character to make sure the proper value is provided to the lender. If the appraised value is much higher than the offer the lender will counter or reject the offer and this may derail the short sale offer.
The Short Sale Specialist must demonstrate to the mortgage bank(s) that the home is upside down, the buy offer is fair and just, and the homeowner has a financial hardship worthy of a short sale. This financial hardship can be due to job layoffs, illnesses, divorce, or already the unexpected large increase in mortgage payments due to interest rate resets.
What’s Causing the high quantity of Short Sales in the Bay Area Real Estate Market? Today, the upside down Mortgages in California are due mostly to the risky, highly leveraged loans that were extensively used over the past 7 years to buy homes with little or nothing down. Worse however, many of these loans were adjustable rate loans, or negative amortization loans in which the loan balance gets higher every month.
In addition, Bay Area home prices have decreased by as much as 35% to 65% in some areas. These factors are causing many home owners to consider a Short Sale to solve their financial crisis. The consequence is, there are 1,000’s upon 1,000’s of Bay Area homeowners who are upside down on their mortgage loan by tens of thousands of dollars, and can no longer provide their mortgage payment.
Do I need a Real Estate specialized? Although, it is theoretically possible to conduct your own Short Sale (ie: Do-It-Yourself), we strongly recommend that you do not. Here is why: 1.) Our sets effectively cost you nothing… Need I say more?… but I will. We Negotiate our fee’s with the Mortgage edges, and we do not charge any kind of up front fee’s (be very cautious of anyone who wants to charge an upfront fee by the way).
Why should I work with J. Diaz, REALTORS? We are glad you are thinking about this question… The National Association of REALTOR’s recently conducted a statewide survey which reported that only 20% of all Short Sales truly closed escrow!!! That’s terrible.. the Great News is our closing Rate is better then 90%. How you may ask?… Experience – Education – Tough Bank Negotiations – Dogged Persistence. Our team consists of Bank Negotiators, Real Estate Internet Marketing expert, Listing and Sales experts, and Transaction Coordinators. Our team experience goes back to the mid 1990’s when the Bay Area experienced it’s last major real estate down turn.