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Can someone explain Short Sales to me?
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NewLeaf2012
LIF Adult
Member since 1/11 2741 total posts
Name:
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Can someone explain Short Sales to me?
Short Sale Subject To Bank Approval...
What does that mean? Who owns the house at this point? The bank or owner?
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Posted 9/6/12 10:12 PM  |
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marianne13
LIF Adolescent
Member since 6/10 887 total posts
Name:
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Can someone explain Short Sales to me?
A short sale is when the seller owes more $$ to the bank than the house is worth. So the bank will not get back its entire loan when the seller sells the house. The bank has to approve the price at which the house will sell at. So if the bank thinks your house is woth $500k, they won't let you sell it for $480k, because that $20k will come out of their pockets. Also, I believe the seller would have to show the bank why they can't afford to keep the house anymore. The realtors on this site, Beth and Christine, know alot about short sales.
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| Posted 9/7/12 12:02 AM |
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Re: Can someone explain Short Sales to me?
When it says "short sale pending bank approval" - - the seller still owns the house. But as marianne13 said, with a short sale, the bank has to agree to take less than what it is owed, because the market value of the house is less than the payoff amount of the seller's mortgage.
So unlike a traditional sale, where the parties go to contract, the buyers get their mortgage, and then you close, with a short sale, the parties go to contract and then submit it to the bank (who holds the seller's mortgage) to get the bank's approval of the sale. Until the bank gives approval, the sale cannot progress any further. Bank approval can be given quickly (within 30 days), but often takes months.
As for whether approval will be given: The short sale criteria varies by bank, but a seller will typically need to show that they've suffered some type of hardship (job loss, illness, disability, divorce, death) that makes it impossible for them to continue to pay their mortgage. Usually they are in default on their mortgage, or default is imminent. The banks also do their own valuation of the home to determine value, so if a house is worth $300K and the seller owes $350K, the bank may accept $300K or a little less, but they won't accept $200K. But each bank has their own formulas/guidelines re: what they will accept in terms of price/value. This info is not made public, but if you do enough short sales, you start to become familiar with what each bank will take.
At my real estate company, we have a short sale partner, a law firm that specializes in short sales, who handles and expedites all negotiations with the bank, which really helps make things go quickly and smoothly.
The tricky thing for buyers is that houses that are in contract "PBA" or pending bank approval show up as available on MLS and other real estate sites. When a non-short sale house goes into contract, it no longer shows as available on the websites. So it's frustrating to continually come across the same house in your searches and it's not available!
Let me know if you have any more questions.
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| Posted 9/7/12 10:01 AM |
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NewLeaf2012
LIF Adult
Member since 1/11 2741 total posts
Name:
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Re: Can someone explain Short Sales to me?
Posted by Century 21 Dallow - Christine Braun
When it says "short sale pending bank approval" - - the seller still owns the house. But as marianne13 said, with a short sale, the bank has to agree to take less than what it is owed, because the market value of the house is less than the payoff amount of the seller's mortgage.
So unlike a traditional sale, where the parties go to contract, the buyers get their mortgage, and then you close, with a short sale, the parties go to contract and then submit it to the bank (who holds the seller's mortgage) to get the bank's approval of the sale. Until the bank gives approval, the sale cannot progress any further. Bank approval can be given quickly (within 30 days), but often takes months.
As for whether approval will be given: The short sale criteria varies by bank, but a seller will typically need to show that they've suffered some type of hardship (job loss, illness, disability, divorce, death) that makes it impossible for them to continue to pay their mortgage. Usually they are in default on their mortgage, or default is imminent. The banks also do their own valuation of the home to determine value, so if a house is worth $300K and the seller owes $350K, the bank may accept $300K or a little less, but they won't accept $200K. But each bank has their own formulas/guidelines re: what they will accept in terms of price/value. This info is not made public, but if you do enough short sales, you start to become familiar with what each bank will take.
At my real estate company, we have a short sale partner, a law firm that specializes in short sales, who handles and expedites all negotiations with the bank, which really helps make things go quickly and smoothly.
The tricky thing for buyers is that houses that are in contract "PBA" or pending bank approval show up as available on MLS and other real estate sites. When a non-short sale house goes into contract, it no longer shows as available on the websites. So it's frustrating to continually come across the same house in your searches and it's not available!
Let me know if you have any more questions.
Thank you... I guess we have to find another place to live soon. Nice of my landlord to give us another years lease and then put the house on the market without telling us...
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| Posted 9/7/12 11:26 AM |
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