Irvine Land CA

Short Sales

A short sale is the selling of a home for less than what is owed on the property. The Lender, rather than the homeowner is stuck with the loss. Here is an example:

Homes market value is $300,000.
Homeowner owes $400,000 on the property.

If this was sold traditionally, the new buyer would pay $300,000 and the homeowner would pay the bank the difference of $100,000 plus Realtor commissions and the house would transfer. This does not happen that often, as most selling homeowners do not have the money to pay the balance owed to their lender(s).

In a short sale, the Lender accepts the sale of the home for less than what is owed on the property to prevent a foreclosure and the potential of the home becoming real estated owned by the lender. The bank takes the loss, and allows for the ownership to transfer. 

Banks do not want to own property, so they will agree to short sale homes IF the offer on the property makes sense.

Short Sales are GREAT options for homeowners that simply can't bring their loans current. Short Sales prevent foreclosure and according to recent Fannie Mae (FNMA) bulletins; The short selling homeowner can be back in the market for FNMA financing after 2 years as opposed to 5 years if foreclosure occurs.

But, buying short sales can be a test in patience. Because the bank is involved in the sale, these transactions can be slow, sometimes arduous to complete. There are still deals to be had if the buyer is patient and is "high bidder" the best offer by the time the bank approves the short sale. This can take 30 days to 6 months for banks to approve and a 30 day escrow would take place thereafter.

If the Lender does not approve the short sale, the house will foreclose unless the loan is brought current.

Hope this helps your understanding. There is opportunity in short sales, but you must have patience. If you need assistance buying or selling a short selling home, please contact us for more information.


Sincerely,


Brian Fox
Ameritage Realty