Together with the decrease in home values in the past couple of decades, some homeowners who need to sell in the current market find themselves trapped, as they owe more than their home is worth. In this circumstance, the short sale can become a feasible option.
A quick sale is only a sale in which the proceeds are not enough to cover all of the outstanding obligations associated with the sale of the house such as the mortgage or mortgages, unpaid property taxes, attorney’s fees, title expenses, commissions, etc.. The lender has no obligation to agree with this, but many will. In most cases, a short sale is attempted by sellers who are facing foreclosure or have fallen behind and no longer possess the ability to continue making their payments.
The seller’s lender’s job is nothing more than that of a contingency. This may vary by state depending on if it’s a title theory state or lien theory state. This advice applies to Illinois, which is a lien theory state (the owner retains title and the creditor holds a lien on the property)
The seller owns the house and finally is the one that, with the help of the agent, accepts, rejects or proposes a counter offer once an offer is received. When the offer is accepted by the seller, it is done so contingent on their lender agreeing to accept the net proceeds of the sale as full settlement of the amounts owed. I have had more than one occasion where an agent working for a buyer asks when their deal will be submitted to the bank, even before the seller has agreed to accept it. It may add to the confusion if multiple offers are received. Some believe that all offers must be presented to the creditor. This isn’t accurate. All offers must be presented to the vendor, not to the lender. The goal of the listing agent should be to get the best offer possible, thereby giving the transaction the best possible probability of actually closing.
What are the odds of a successful closure?
They’re actually better than they used to be. Nowadays it makes sense for banks to seriously consider accepting a short sale as, oftentimes, they net more money overall versus going through the whole foreclosure process, taking the home back and marketing it as an REO (Real Estate Owned). Some nations are non-judicial. Judicial foreclosures take a lot more time to finish. In Illinois, the process can take a year or more. There are a number of states which take up of 3 years. When you consider that, in most cases, the bank is receiving nothing while the process drags along, you start to see their motivation to consider other choices. Add to this the deterioration to the property during that time along with the additional carrying costs, and the benefits to the bank become even more clear. The bank in this circumstance, much like the homeowner, is looking for the best way to limit their losses.
The benefits of a Brief sale:
Lenders generally don’t allow the seller to receive any of the proceeds of the sale. This is fair when you consider that the entire basis of the short sale is negotiating with the creditor to make them take less than what they are owed. The only exception I have seen for this was years ago when, because of an error, we were out of balance by $.06 The name company actually cut a check to the vendor for six cents! As a seller in this circumstance, one needs to bear in mind that, if the lender agrees to the brief sale, they are allowing the seller to avoid having a foreclosure on their record that follows them around for several years. Additionally, most short sales also allow the seller from under the debt without being chased for a deficiency. Both of these things should be all the motivation you want.
Who should you call?
These transactions are not for beginners. There’s absolutely not any substitute for experience when it comes to navigating through this procedure. An experienced agent and lawyer are crucial. In this situation it is reasonable to ask plenty of questions. There are specialized short sale/Merritt Island Rat Removal/ foreclosure courses available for agents. Some are very rewarding but these courses alone do not necessarily make the broker an expert.
What will it cost?
Typically, it will cost you nothing unless there’s an upfront fee billed by the agent to list the home. All agents negotiate their own fees. It should cost you nothing to speak to an agent and get information. All commissions and other closing costs a vendor would normally pay will be payable and, if the lender agrees to the brief sale, they are agreeing to the net amount of the sale so essentially, it is the lender that is paying your closing costs. For someone facing foreclosure, a short sale can be an excellent solution.