Friday, May 29, 2009

Short Sales

Short sales are not small sails on a boat nor are they quick sales between listing a property and having it under contract. They are very popular though today. Actually I have noticed there are a lot of sales today in super markets, retail stores and even hotels. But a real estate short sale is the sale of a property that has a sale price lower than the mortgage owed on a property.

My first experience was 12 years ago with a sale to my son. He was my most difficult client at the time wanting a three bedroom condo on a street where only 6 of these models existed. By phoning all the residents I came across a family who had to move and they owed $10,000 more than the condos were selling at the time. Thus began my nightmare.

Short sales are not easy for the agent, seller or buyer. It takes a lot of patience and many times these transactions never get to settlement. In the current market with so many sale prices dropping, short sales are plentiful. If you have the time and patience they can be bargains.

Banks are very difficult to deal with on this matter. For some reason every time I call the bank I have to start all over with the process. I thought computers were supposed to retain information so that we wouldn't have to do this.

Do you ever wonder what happens to all the information that is sent somewhere and no one seems to know what you are talking about when you make a followup call?

The short sale process goes a little like this. A seller has to sell a home. He calls the bank to tell the bank that his property is not worth the mortgage. They don't care at the moment. The seller lists the property with a real estate agent who spends a lot of time and money marketing the property.

In the meantime, the bank still doesn't care about the sale UNTIL an offer is presented on the property. Buyer and Seller sign the offer and then the nightmare begins. The agent sends all the information - listing, offer, and closing statement to the bank. The seller must fill out a financial statement and have a letter of request for a short sale.

Provided this information gets to the right person the first time (most often it does not) then a committee reviews the information and either counters, rejects or approves the sale. In most cases the real estate commission is lowered. The year and a half that the agent has spent on marketing the property becomes a negative.

This is the simple version. Time wise the whole transaction from offer to settlement can take 3 to 6 months. As I said if you have the time, bargains are available. Smart sailing!

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