What Is A Short Sale On A House?

What is a short sale on a house? A short sale on a house is where the bank or mortgagor agrees to accept less than what is owned on the property or home. The mortgagee (owner) agrees to sell the home and move, leaving the home in good condition for the new purchaser of the home. Sounds simple, huh?

Short sales are not simple at all. Knowing how to do a short sale is really the key to the entire picture. When the government came up with their new short sale program (HAFA) thousands of realtors ran to get in on the business. Why? Because many realtors were practically starving in a bankruptcy market and they were looking for some easy sales.  According to the news, people facing foreclosure could now do a quick and easy short sale that was guaranteed to close in ten days or less. Sellers would be given a $1,500 moving expense and the owner of a second trust deed would be given $2,000. The mortgagor would also be given $1000.

The banks were laughing at this proposal. They agree to lose $100,000 or more in some cases and the government was going to give them $1,000. The banks soon found out they had little choice, but to comply. The problem was the HAFA program did not work as planned. Very few ever closed in ten days and were looking at several months to close. Many buyers walked before the short sale was ever approved.

Inexperienced realtors wanting to do short sales caused many thousands of homeowners to eventually face foreclosure. So what is a short sale on a house? A short sale on a house can be obtained by qualified individuals who know all the ropes involved in doing short sales. Short sales can be done easily with the correct information. When doing a short sale make sure you first hire a professional realtor who has a few years experience in negotiating and closing short sales successfully. It is not enough the realtor has attempted a short sale and has talked to a few banks. The Realtor must first have closed several. By hiring an experienced realtor you are assured that the realtor can at least have a shot at closing yours.

Notice the words “realtor.” The reason realtor is so important is the fact that she belongs to a Board of Realtors, paid a fee to be there and thus will abide by the rules of the board dictating ethical conduct. The other requirement for being a member of the Board of Realtors is “Due Diligence.”  This means the realtor will do her utmost best to close the deal successfully and always thinking of her client first.

Preparing for the short sale on a house.  Before even contemplating about beginning a short sale, get your home and paperwork ready. Most short sales fail due to the fact that the owner and the realtor did not have the paperwork ready. The bank will want many documents such as two month bank statements, proof of income and tax returns in some cases. You will need to fill out a complete application and agree to a credit report. There needs to be comparables done on your property to show the value of the home also. Waiting till the home sells and then beginning the paperwork will delay the sale for weeks.

The home needs to be clean and staged. Staging means to clean out the clutter and get rid of all personal mementos such as pictures. The home must remind the prospective buyer of how this could be his new home, not yours. Also the smell of baking bread in a home entices a buyer to sit down and enjoy the home more.

Keep in mind that a short sale can be made easy when following the tips here. Never listen to a bunch of promises from inexperienced realtors. Have your paperwork prepared and start looking for a place to move to when you sell your home. Also be aware that there are tax consequences to a short sale, so check with your CPA.