What Is a Short Sale?

A short sale is a type of financial option available to a homeowner who is experiencing some form of financial duress. They may have fallen behind in mortgage payments, or have a home that is worth less than the outstanding balance they still have to pay for their mortgage. In such cases, that homeowner must part with the home. Here is some information from a real estate appraiser in Napa County, CA about how the process works.

What to expect in a short sale

Short sales often begin when the value of a home drops by 20 percent or more. Before the process starts, the lender holding the mortgage must agree to the decision to short sell the house. That lender will need documentation explaining the homeowner’s decision and why the sale makes sense. Keep in mind that the lender could lose a lot of money in a short sale, so you must be persuasive with your reasoning.

If the lender approves the short sale, the buyer will begin negotiations with the homeowner and then get approval on the terms of the purchase from the lender. But again, no short sale can occur without the approval of the lender, so both the buyer and homeowner might find that they are somewhat at the mercy of the lender in the transaction.

Short sales can be lengthy, complicated transactions, taking up to a year to process in some cases. However, they are a better option than foreclosure for homeowners who do not immediately need the money, as they are not nearly as detrimental to the homeowner’s credit rating. In fact, a homeowner who has gone through a short sale could very well be eligible to purchase another home immediately, though some restrictions may apply.

Purchasing a short sale property

If you’re interested in buying a short sale property, you can expect to go through three general steps:

• The short sale package: At this point, the seller submits a financial package to the lender, which includes various financial statements, copies of financial records and a letter that details the hardships experienced by the homeowner.
• The short sale offer: If the seller chooses to accept your offer, the listing agent will then deliver the listing agreement, executed purchase offer, earnest money check copy, short sale package and buyer’s preapproval letter all to the lender.
• Bank processing: Once the bank (or other lending institution) has all of the paperwork and the offer, it will take its time to review and then either approve or deny the short sale. The length of time this process will take can vary widely, from weeks to months.

In many other ways, the short sale process will work very similarly to any other real estate transaction. There will just be some different elements in how you and your real estate agent create a purchase agreement.

For more information about what a short sale is and how the process works, contact a real estate appraiser in Napa County, CA at County Appraisals Inc. today.

Categorised in: Real Estate Appraisals

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