Although Short Sales have been around for a very long time, it is only in the past few years that they have become so commonplace. Most people will never encounter a short sale in their lifetime. For those that wind up in a short sale situation, the process can be very intimidating and extremely frightening.
So, what is a short sale? A short sale occurs when you ask the bank that is holding the mortgage or mortgages (sometimes multiple banks with multiple mortgages) to accept an offer for the sale of the home that is less than the amount owned on the mortgage or mortgages.
The short sale process varies by bank, by the mortgage type (conventional mortgage, Fannie or Freddie backed mortgage, private mortgage), by the number of mortgages, if the seller has PMI (Private Mortgage Insurance), whether or not the property being sold is an investment property or a primary residence and many other factors. Each situation is unique and each result is different. The results could even change if the buyer changes (if the first buyer decides not to proceed so you find another buyer – and a new negotiator handles the file and has different criteria for the approval).
We have seen the banks forgiving a portion (and sometimes all) of the difference between what the home sells for at the short sale and what the seller owed on the mortgage. Again, this varies based on the circumstances surrounding the sale. Even on investment properties, we have seen the banks ask for a contribution from the seller and forgive the balance.
The timeline for the short sale process can vary too. I have had files close in as little as 6 weeks (usually with property that had a buyer that did not complete the process and a new buyer submits an offer). I have also had files take over a year (this was when the banks were absorbing other banks and files were lost…this does not seem to be the situation now). It is more likely that the process will take anywhere between 4 and 6 months – from the time the property is listed until the time the sale is closed.
Can you buy a home after a short sale? Fannie Mae has stated that they will consider loaning money for home purchases as soon as 2 years after the short sale was completed. This would all depend on the circumstances surrounding the short sale and the credit score of the short sale seller.
For more information on the Short Sale process and the HAFA, HAMP and other Foreclosure Alternatives please visit my website http://www.mlegac.com and follow the links to Discovering a Better Route. I am a CDPE (Certified Distressed Property Expert) and work with a team of trained Short Sale Specialists to make sure your needs are met every step of the way.
