For Buyers & Sellers

A short sale is when a homeowner sells their property for less than they owe on their outstanding mortgage. Should it become clear that a borrower won’t be able to continue making their mortgage payments, the lender may permit them to execute a short sale. With a short sale, the lender will have an opportunity to recoup any potential losses that result from delinquency, and the homeowner can avoid foreclosure. While a short sale isn’t the ideal scenario for either the bank or the homeowner, it is better than the alternatives for everyone involved.

The short sale process is complex and has many moving parts, and therefore it is hard to estimate a timeline with any degree of accuracy. That said, generally speaking, short sales can take anywhere from one month to six months to complete, though there are numerous reasons the short sale process can be prolonged even further.

A short sale will most likely take longer than a traditional sale for one simple reason: communication. Nearly every step in the short sale process requires the homeowner to communicate with the bank for one reason or another. Because of this, there is a lot of back and forth, and even more waiting for things to be resolved. It can take as long as four months for the initial lender to even approve a short sale.

Because banks will only allow borrowers to conduct a short sale as a last resort, they are going to ensure that a short sale is the only logical choice before they proceed. Lenders have no problem taking their time to make sure they are making the right choice, as there is a lot of money on the line. Only once they are certain a short sale is in their best interest will they move forward with the process.

Once a homeowner receives the green light, they are expected to sell the home themselves. Because the housing market is unpredictable, it’s difficult to anticipate how long this process might take. And remember, the time it takes to actually sell the house is in addition to the time spent seeking the bank’s approval in the first place. Even in the best-case scenario, the average homeowner is already looking at three to four months to sell their home.

After receiving an offer, the homeowner must have it approved by the lender before they can move forward, which will tack on more time to the short sale process. If they are lucky, the banks will simply accept the terms of the offer. However, there is a chance more negotiations will be required, further prolonging the process.

The short sale process has become common practice for homeowners with less than perfect financial standing. Of course, no homeowner is happy to find themselves in the position to conduct a short sale, but the fact remains: short sales have proven beneficial to everyone involved. The seller no longer has to live in fear of a foreclosure, the bank can retain some of the money they would have otherwise lost in a foreclosure, and there’s a good chance the buyer will end up with a great deal.

The short sale process has become common practice for homeowners in less than perfect financial standing, and for good reason: it’s indicative of a borrower’s impending inability to pay down their mortgage. However, contrary to popular belief, short sales are anything but bad; they are simply associated with an unfortunate situation. In fact, you could argue short sales benefit everyone involved. The short sale process is, after all, specifically intended to help homeowners when they need it the most.
Of course, no homeowner is happy to find themselves in the position to conduct a short sale, but the fact remains: short sales have proven beneficial to everyone involved. Homeowners no longer have to fear the looming threat of a foreclosure, banks can recoup some of the money they were initially promised at the time the mortgage contract was signed, and there’s a good chance the end-buyer will end up with a great deal. Low and behold, the short sale process is a blessing in disguise, and the following should clarify why.
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Short sale process for buyers

Selling a short sale

Buying a short sale comes with a significant caveat: you aren’t negotiating only with the homeowner, but instead negotiating with both the homeowner and their lender. Any offer submitted on a short sale must receive approval from the respective lender, which could make negotiations a bit longer and more difficult, but with Greenway here to handle the process, we will ensure it all goes smoothly!

Tips For Buying A Short Sale Property

Those who already understand the short sale process are more than aware of how long it takes. Buyers should, therefore, exercise patience to the highest degree. Buying a short sale property could take a long time, but the savings should be worth the wait!

Ensure that you have an agent who is experienced in short sales to help you navigate this process. If you don’t have an agent, contact us and we will refer to you an experienced agent.

Remember, your offer needs to be approved by the bank for it to be accepted, and it’s safe to assume they won’t take anything less than what they believe they can get for it. Additionally, there are likely to be multiple offers on most short sales in today’s market which means that everyone who submits a higher offer will automatically have an advantage over you.
Not unlike a traditional sale, cash will always be more appealing to sellers than using a traditional loan. In the event you can come up with cash, there’s a good chance the seller will favor your offer over those that aren’t cash. Perhaps more importantly, cash deals are a lot less likely to fall apart in the eleventh hour.

It is absolutely essential to record everything during the short sale process. Keeping everything in order, from paperwork to meetings, will help facilitate an already complicated process, which is why Greenway Financial documents every aspect of your short sale to make sure the process is moving as smoothly as possible.

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The Short Sale Process For Sellers

The short sale process for sellers can be broken down into five simple steps:

  • Identify the current situation
  • Demonstrate provable financial hardship
  • Enlist the services of a qualified agent
  • Gather the appropriate documents
  • Proceed to sell the house
For sellers, the short sale process starts when they realize they have an ongoing lack of funds to cover their monthly mortgage obligations. If a homeowner is struggling to pay their principal and interest in full each month, this is a telltale sign that a short sale may be in order. A homeowner can request a short sale if the burden of paying down their mortgage becomes too much. However, homeowners who actually miss payments will be subjected to foreclosure, which is an entirely different process altogether. Once you realize you are unable to keep up with your mortgage payments, contact Greenway Financial for assistance with your short sale. We can help you with every step along the way, including finding an agent, if needed.

It is true when they say that the first step to solving any problem is admitting there is a problem, and short sales are no exception. Homeowners who find it difficult to keep up with mortgage payments must acknowledge this if they are to be considered a candidate for a short sale. However, there’s more to it than admittance; they will have to actually prove their hardships. That’s where step two comes in: proving to the lender that the payments are too hard to keep up with.

To be considered for a short sale, homeowners must prove to their lenders that they can’t keep making payments at their current rate. The homeowner will need to provide the appropriate financial documentation that suggests their current payments are incapable of continuing.

Once the lender is convinced the homeowner can’t keep up with their payments, they may approve a short sale. When a short sale is approved, consider hiring an agent who specializes in short sale transactions, as they will know how to navigate the process smoothly and efficiently.

When the seller receives an offer, they must submit it with certain documents to the lender to receive approval. Each lender has specific document requirements for the short sale process, and your agent will communicate the process to you.

If the lender accepts the request, the homeowner may proceed like a traditional sale; if not, more negotiations may be necessary. Either way, the homeowner will have to work with the lender on landing on a specific offer.

While an agent isn’t necessary to sell a house via a short sale, it doesn’t mean that selling a house yourself is the recommended route to take. An agent can certainly help sell the home faster and for more money, and, perhaps even more importantly, the lender would appreciate the assistance of a real estate agent. A truly great agent, one that’s well-versed in the short sale process, can easily offset their cost with a higher sales price.
A professional short sale negotiator assumes the responsibility for facilitating all short sale paperwork between the seller and their lender, along with acting as the main point of contact for them. The homeowner authorizes the negotiator to receive information about the loan and negotiate with the lender. Negotiators help homeowners fill out mortgage assistance requests, write hardship letters, and confirm receipt of documentation needed by the lender. Greenway Financial can help you navigate every step of this process!

To be clear, neither short sales nor foreclosures are ideal situations homeowners want to find themselves in. These two processes typically present themselves to distressed homeowners (those who fall behind on payments or are at risk of doing so). Regardless of which route the homeowner takes, they will be forced to leave the home. However, the time it takes to leave and the consequences left in the wake are different in each scenario.

Again, short sales are an attempt on behalf of distressed homeowners to get ahead of a bad situation. Provided the lender allows them to, the seller will attempt to conduct a short sale to recoup as much of the money they owe the bank as possible. In a short sale, the owner will sell the home, but all of the money will go to the bank; that payment is usually enough to keep the homeowner from having to file for foreclosure.

Foreclosures are usually the last options exercised by lenders. If a short sale isn’t possible, the lender will simply seize the home when the borrower fails to make payments. Since none of the money was recouped, the borrower faces more dire ramifications.

Both short sales and foreclosures are the last things homeowners want to have to worry about. Neither the short sale process nor being foreclosed on is good news for a borrower; both result in the loss of a home with subsequent ramifications. That said, there may short sale alternatives for homeowners to consider before they go down a path they can return from.

Homeowners should always consult with their lenders to see if there are alternatives to consider. Depending on the situation, the homeowner may be able to look into revising their payment plan or modifying their loan. In most cases, lenders will want to work with struggling borrowers to reduce their chances of delinquency.

Summary

The short sale process is misunderstood by those on the outside looking in, and even by those with closer affiliations to the industry. However, those unaware of how the short sale process transpires are doing themselves a severe disservice. If for nothing else, it’s those that know how the process plays out that are in the best position to take advantage of it.

Have you ever wondered whether a short sale might be the right choice for you?

Have you ever considered buying a short sale home?

If you would like further information, or if we can be of assistance to you in the future, please feel free to let us know in the contact form below!