Short Sale Explanation

It occured to me today, after typing the following explanation on an e-mail for about the 6th time, that I should just save it in my documents so I could use it again without having to re-create it every time.  So since I have done that, I would like to share it with anyone out there who is unfamiliar with the term “short sale.”  I have asked some non-real estate related consumers (who are also my friends) what they think a “short sale” is and at least 50% of the time, they come back with the answer:  “it is a really short escrow.”  Well, this answer could not be further from the truth.  Please, if you are interested, read on. . . . .

1)  The owner of the house decides for one reason or another he cannot make the payments on mortgage that is secured by his house;

2)  The owner of the house stops making payments;

3)  The owner of the house and his real estate agent put the house on the market at a price that they are certain will bring some offers and this is published in the mls as a “short sale” which is subject to the lien holder (bank’s) approval.  It is called a “short sale” because the amount of money that the market will bear for the house is not as much as the mortgage indebtedness,  there will be a shortfall;

4)  An offer comes in from a buyer;

5)  The owner of the house agrees to the offer – they really don’t care what they agree too as long as it does not involve them actually paying any money;

6)  The contract goes to the lien holder for their approval.  The lein holder essentially agrees to take over the contract and perform as the seller and buyer agreed;

7)  The lien holder orders a BPO (broker’s price opinion) or an appraisal and sees how close the offer he has in hand is and makes a decision as to whether to accept, counter or reject the buyer’s offer.

8)  Once the bank approves, the escrow goes forward as if it is normal – getting approval takes anywhere from 1-4, 5, 6 months. 

In the meantime, the bank is working on foreclosure proceedings on this house too.  So one never knows whether one will beat the clock and stop the foreclosure proceedings.

Kind of interesting, huh?

Now what can I help you with?