Realtor Short Sale

A short sale is a real estate transaction that occurs when a homeowner sells a property for less than they owe on the mortgage, and the lender approves of the "short" payoff. A short sale is any property sale where the proceeds of the sale fall "short" of the original loan amount. It occurs when a seller sells a property for less than the balance of their loan, and the lender agrees to accept less than the amount originally due to them after all costs of the sale. Short sales are commonly initiated by distressed homeowners who are underwater on their mortgages (the loan balance exceeds the home's fair market value) and can't afford or otherwise keep the home but want to avoid foreclosure. But they can also occur if the accepted sale price on a home is higher than the mortgage but not high enough to pay all closing costs and commissions. In a successful short sale, the lender typically agrees to release the lien on the property in exchange for receiving the loan payoff. It may either forgive the "deficiency" or difference between the original loan balance and payoff or make a plan with the seller to settle the remaining debt. In either case, since the lender will be receiving a short payoff in such a transaction, it must agree to grant a short sale, and will generally only do so if it will benefit the lender's bottom line. If the lender doesn't view the homeowner or property as a good fit for a short sale, it may disapprove of the sale.

A legitimate short sale must be an arm's length transaction involving an unrelated buyer and seller and a bona fide lender. The following is an example of how the typical short sale unfolds:

· A homeowner has a home that's worth less than what they owe on the mortgage but must sell it as a result of hardship.

· The seller enlists an agent to discuss the short sale proposal (known in short sale terminology as the "short sale package").

· The seller's agent approaches the lender to assess their willingness to entertain the proposal and identify what the lender requires for a short sale.

· The seller works with their agent to price the home and put it up for sale.

· A buyer's agent makes the seller an offer on the property.

· The buyer and seller negotiate the offer through their Respective Agent

· The seller's agent accepts the offer on the seller's behalf, and both the buyer and seller sign it, subject to the lender's approval.

· The seller's agent presents the offer to the lender along with the short sale package including the signed purchase contract, a hardship letter explaining why the seller can't keep the home, and a narrative about the local market trends that support the Short Sale.

· The lender does a "bottom-line" review of the package and eventually responds with approval, refusal, or, in some cases, no response. If the lender refuses the short sale, they'll often state the net proceeds that would be acceptable for approval. In the case of approval, the lender sends a short sale approval letter to the seller in order to demand the loan payoff in return for releasing the lien.

· Escrow closes, and the proceeds are turned over to the lender, not the seller

· An underwater home: This means that a home has a fair market value that's less than the remaining balance on the homeowner's mortgage.

· A seller with a hardship: Most lenders view job losses, surprise medical costs, the homeowner's death, natural disasters, and military service as acceptable hardships for a short sale, to name a few examples. Whatever the hardship, it should serve as a clear impetus for the homeowner to sell "short."

· A willing lender: There's no point in proceeding if the lender refuses the possibility of a s...

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source https://dictionary.reverso.net/english-definition/respective+agency