Before we get into the top 3 mistakes…what exactly IS a short sale?
A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of debts secured by liens against the property. An example would be purchasing a property or pulling equity out at the top of the market and then the market tanks. You purchase a home for $300k and 2 years later the market tanks and the current market value of the property is only $200k. At this point, you owe more than what you would receive selling the property. Now, this does not necessarily cause a problem unless you want or need to sell the house. Kind of like when you buy stocks and the stock price goes down, stock experts will tell you not to sell, to hold on until the stock prices go back up. However, what happens, if life happens and you do have to sell?
A short sale can happen if all lien holders agree to accept less than the amount owed on the debt. A short sale has two intrinsic and in severable components. A Short Sale is successful when (1) The Lien holder(s) (a.k.a. Mortgage Company) is agreeable to net less than the amount owed on the note (debt) as the result of (2) an arm’s length sale at or below the Appraised Value for that property. The agreeable selling price is defined to be at or less than the appraised value allowing the process to be attainable. A prudent buyer will not pay greater than the appraised value, and a Bank or Finance company will not provide a mortgage for greater than the appraised value, thus limiting the Short Sale proceeds to a maximum gross yield of the property’s Appraised Value.
That’s a short sale. What are the biggest mistakes people make?
- They try to negotiate with the bank themselves. Most people do not have the knowledge, time, connections or skill to negotiate with banks. Every bank is different. And, this tends waste time and resources and leaves the home owner frustrated and many time desperate because of the process.
- They do not hire an experienced short sale specialist. Experienced short sale specialists will have a strong team of people who manage every step of the short sale process. It is not a good idea to hire any listing agent out there. Most don’t know the short sale process. In the NH and MA areas, I refer folks to Tavarez Realty Group. They have the knowledge, team, connections (real estate attorneys, bankruptcy attorneys) and a streamlined process to help people.
- Because, they have not truly made the decision to sell their home via short sale, they are uncooperative with the agent they choose. Selling your house because of a distressed situation is difficult. Typically, people are overwhelmed, confused and nervous about the next step. Remember, a short sale is not the end of you ever owning a property again. It is the first step towards improving your current situation in life.
A successful short sale requires cooperation. Sellers need to submit required documentation to the bank in a timely manner. If the package is incomplete, the bank won’t process the file, and that will delay approval. If a seller refuses to submit personal financial information and a reasonable hardship letter, the seller will not qualify for a short sale.
If you or someone you know need to sell your home via short sale, don’t go it alone, hire a short sale specialist and be cooperative and you will greatly increase your chances of a successful short sale.