The lesser of two - the short sale
Charleston South Carolina Real Estate
A short sale is a sale that occurs where the closing price is less than the balance owed on the seller's mortgage and the seller will not be making up the difference to satisfy the mortgage. A short sale can result in a very good deal for a buyer.
In the last year or two, short sales have become common place. The massive, nationwide drop in equity among homeowners and job loss due to economic contraction are by far the biggest drivers for the jump in short sale activity.
In order for a short sale to happen, the mortgage company must agree in advance that they will allow short sale to occur. In addition, the mortgage company for the seller must approve of the terms of the sale once an agreement has been negotiated. Why? The mortgage company shares in the losses.
Short sales are born when homeowners find themselves unable to make their monthly mortgage payments. Just because you find yourself in this position does not mean you will automatically be able to do a short sale on your home.
In order for you to be able to participate in selling your home via a short sale, you will need to convince your lender that doing so is in your lender's best interests. They have to believe that foreclosure is inevitable - and even eminent - if they do not allow you to do a short sale. Note: sellers never "make money" on a short sale.
Before the bank will tell you "yes", you will need to prove to them significant hardship caused by such circumstances as divorce, job loss, illness, or death of a breadwinner. Your situation must be pretty serious before a short sale will be considered by most banks.
If you can find anyway to pay your mortgage, your mortgage company will not be very interested in helping you with a short sale. Many homeowners simply owe more than what their home is worth. Many of these upside-down homeowners default on payments because they cannot stand to continue paying for something that is worth less than what they owe. Making a conscious decision not to make your mortgage payments when you can make them is not the sort of situation that banks look at favorably when considering allowing short sales.
Banks generally manage short sales through their loss mitigation department. Banks are willing to work with short sales only as a last resort. If you are considering offering your home for sale this way, keep in mind that you are asking a lending institution to help you in a way that they have not agreed to do so contractually. They are, in effect, doing you a favor. But, yes, they are also acting in their own best interests because selling a home through a short sale is usually far more cost effective to the bank than foreclosing on that home.
Foreclosures are expensive to banks. Banks do not want to manage real estate and they are not very good at either. While a home waits to go through the foreclosure process and the foreclosure sale, lenders are responsible for insurance premiums, taxes, and necessary repairs and upkeep. This can be very expensive since foreclosures can sit on the market for extended periods of time.
In addition to the direct cost, foreclosures inevitably drawn down goodwill that that banks may have built up within a given community. Whether fair or not, when a bank forecloses on a property, the public does not look upon that bank as a friendly member of the community. If a foreclosure can be avoided, it is simply better business to do so.
If you need help with a short sale, give me a call.
Sincerely,
Chris DeLoach, ABR, BIC
843-654-4578
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