Short Sales 101

A short sale is when the lender accepts a lower mortgage pay­off from a seller because the ho­meowner owes more than the home is currently worth. They’re notoriously complicated to com­plete (unless you are dealing with a professional), but with more and more Americans underwater on their mortgages, they may be getting a closer look by lenders. 

“We’re starting to see that ser­vicers and lenders are viewing short sales as a better alternative than they had in the past,” said Daren Blomquist, spokesman for RealtyTrac, an online market­place for foreclosures. “Some of that relates to the fact that it’s getting harder to foreclose. There are additional requirements in terms of paperwork and require­ments that states and judges are imposing.” 

Short sales are gradually rising. This year, short sales are mak­ing up about 8% of total home sales, up from 7% in 2010, 5.5% in 2009 and 3% in 2008, said Mark Fleming, chief economist of CoreLogic, a provider of housing market data. 

“Short sales are sometimes referred to as a kinder, gen­tler foreclosure,” Fleming said. “Borrowers never get evicted, you never have the vacancy is­sue for the home, so it’s good for the market around it.”

Short sales also typically sell at less of a discount than foreclo­sures, and many say that a short sale is much less damaging to a homeowner’s credit than a foreclosure.

But often a short sale can’t be completed in a snap.

“In general, it is a totally differ­ent type of transaction. You’re not only selling a house, you’re negotiating debt. This is why working with an agent that has specific short sale experience is helpful,” said Jeff Osborne, Broker, RE/MAX Capital City. 

Selling via short sale

To qualify for a short sale, there has to be some sort of hom­eowner hardship that makes it impossible to continue mak­ing payments, Osborne said. A big misconception is that you can attempt a short sale simply because you’re underwater, he said. 

A homeowner interested in this approach should first be in con­tact with a qualified real estate agent and a real estate attorney, he said. Often, listing the home is the first step, but the bank also should be contacted at the start to request a short sale package, Osborne said. 

You definitely want to enlist the help of a real estate agent who deals with short sales on a regu­lar basis, since they’ll have more experience in dealing with lend­ers through the process. At RE/MAX Capital City many of the agents are experienced in deal­ing with short sales and also car­ry the CDPE (Certified Distressed Property Expert) designation.

Then prepare for a process that could take awhile. 

However, others that have gone through the short sale process with a RE/MAX Capital City agent say it’s worth it. Your credit score may take a hit, but rebuilding it without a foreclosure will be much easier.

If you know someone that may be contemplating a short sale, do them a favor and put them in contact with me, a professional real estate agent that knows how to navigate the complexities of a short