A short sale in real estate is a property sale which does not generate enough money to pay back or cover the entire debt owed on the property. The property can be anything, a home, an apartment or just land – as long as the price at which it sells is less than the liens on it (mortgage for instance), it’s a short sale. Even if the property’s sale price covers the mortgage, but not the related expenses and commissions, it is still a short sale. The same is the case with a property having two mortgages.
Lender needs to approve short sale
A short sale is not a right, and is only granted by the lender (the mortgage company or the bank) when it is evident that it is a better alternative than foreclosure, which has additional costs. In a short sale, the lender is going to be losing money, and will only approve it, if that loss is less than the loss it would face in a foreclosure.
Requirements of a short sale
Short sales are dealt with by real estate agents who are experienced with them. An inexperienced real estate agent can mess up your sale by either pricing it too high, or not being able to negotiate with the bank to protect your interests. Moreover, there are two types of short sales generally, those which are a result of hardships and those which are strategic (without hardship). Requirements for a short sale are:
- Underwater home
- Financial hardship for seller
- Approval from lender
- Buyer for the home
Real estate agent’s role in a short sale
As mentioned earlier, it is important that you hire the services of an experienced real estate agent for your short sale, since he/she will be dealing with the following:
- Deciding on the type of short sale for your property. This is important and will affect the whole process.
- Making your case, gathering all documents and submitting tem to the lender.
- Assist you in pricing the property for short sale. Pricing is crucial when it comes to making the sale. It needs to be reasonable for potential buyers but enough to satisfy the bank as well.
- List the home for sale and forward all offers to the seller.
- Negotiate on your behalf with the lender.
- Acquires the short sale approval letter for the seller.