Short sale (real estate)
From Wikipedia, the free encyclopedia
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.
A short sale typically is executed to prevent a home foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.
How to get a short sale to the closing table from
http://www.floridarealtors.org/
You can help associates make short sales more likely to be approved by following a few basic steps.
1. Submit a complete package to the lender. “Start with a legible, fully signed contract,” says Jayne Sanders, a sales associate at The Keyes Co./Realtors® in Palm Beach Gardens who’s handled about 30 short sales in the past year. “Include all the contract addendums. Also, include a cover letter summarizing the sellers’ situation. In that cover letter, I address what’s been done to market the property, and I provide information on the local market. I may be dealing with somebody in Oregon who doesn’t know my local market. I also explain where we are on this offer and that this is the only offer we’ve been able to bring forth [if this is the case].”
Many sales associates submit hardship letters on behalf of their sellers. However, Sylvia Golden Norris, a principal at a Sarasota law firm and the local board attorney for the Sarasota Association of Realtors, advises that an associate shouldn’t do this. “The general consensus in the legal community is that real estate licensees aren’t acting as ‘foreclosure rescue consultants’ under Florida’s Foreclosure Rescue Fraud Prevention Act if they’re providing typical real estate services,” she explains. “They might get into trouble by writing the hardship letter because they’re offering professional services that are outside the scope of the real estate license law.”
2. Treat short sales like regular sales. “Get a meaningful deposit, and have the buyers do inspections within the normal timeframe,” says Goldfarb. “If you wait to get a deposit or to do inspections until after lender approval and the buyers walk, there’s no consequence to the buyers because there’s no deposit and they haven’t paid for inspections.”
3. Check in regularly. Check in with the lender and the buyers’ sales associate at least once a week. “Communicate with sales associates who brought the buyers and let them know exactly what’s happening,” says Jessica D. Roberts, a real estate broker and president of My Real Estate Broker Inc. in Weston. “We have about 60 short sales we’re negotiating today, and we try to call the lenders once or twice a week so that if a sales associate calls, we can pull up the computer file and give the status. Communication is the best way to anticipate questions, and automation is important so anybody in your office can answer questions.”
