A short sale is a result of a homeowner’s home value being less than the mortgage balance and not being able to bring their mortgage current. The homeowner may have borrowed too much for the property, or the market dropped, causing the property’s fair market value to be less than the existing mortgage balance. Usually, the homeowner has experienced some life event that has depleted all of their assets, and they are in distress. The homeowner generally initiates a short sale to avoid foreclosure. The homeowner has to convince the lender that a short sale is the best option. Both the homeowner and the lender have to agree that selling the property at a loss is preferable to foreclosure. The short sale can only occur if the lender agrees to accept less than the balance owed on the existing mortgage.
Convincing the lender may not be an easy process.
Lenders will require a comparative market analysis (CMA) or a broker price opinion (BPO) before agreeing to a short sale. A lender may not want to pursue a short sale, if the offer is too low, and instead wait for foreclosure if they believe that they will recover more money for the property during foreclosure.
Homes sold “as is.”
The mortgage company will usually cover closing costs of the transaction when they agree to a short sale. Their concession on closing costs will result in the lender expecting the buyer to purchase the home in its current condition. The lender will typically refuse to pay for suggested repairs that might be disclosed in the home inspection. The bank probably will not pay for cosmetic repairs, a home warranty, or minor repairs that do not affect the home’s safety.
It can take longer to close.
There can be a delay that can take weeks or months to get a response from the lender on a short sale purchase offer. The lender may be sitting on many other files and has not been through your file. Much depends on when the Notice of Default was filed, the lender’s backlog of foreclosures, and the amount of paperwork the seller submitted. If there are multiple lenders involved, the process could take longer.
Lenders can change conditions.
Lenders reserve the right to renegotiate the terms of a short sale at the last minute. If the market changes, then the lender may want to change the terms of the contract. Other reasons that they may want to change terms will be if new laws pass or if they receive further information involving the sale.
You will lose control of the transaction.
A short sale closing process can take longer. The seller’s lender is who determines when the home’s sale will finalize. Both the buyer and the seller have to work with the seller’s lender to get the sale completed.
Debt Rescue Law has helped many people with foreclosure, short sale, bankruptcy, debt settlement, loan modification, and student loan settlement. Contact us at (833) 707-1234 for a free consultation.