Short sales in real estate have been a popular topic not only in Murphy NC, but all over the United States. National media has brought attention to this topic, and many people simply don’t understand what a short sale is. A short sale is not like a real estate foreclosure, which is is where a bank has repossessed a home or land parcel because the borrower failed to make their payments.
A short sale happens when the owner (or borrower) still has possession of the property and sells the property for less than what is owed to the bank or mortgage holder.
A mortgage must always be satisfied (paid off) in full in order for a property to sell. In order for that, one or a combination of three things must happen:
- The most popular and most talked about is the bank/mortgage holder writes off the loss and “forgives” the borrower. In some instances, it can still negatively impact your credit – but not as bad as a foreclosure.
- The borrower brings cash to the closing table to pay for the difference. This rarely happens because if the homeowner had the money to pay the difference, they would likely not need a short sale in the first place. Short sales are generally reserved for when foreclosure seems inevitable and the borrower has no way to pay back the note.
- The owner borrows the money to pay the difference. Many times the institution (so long as it is not a mega-national company) will loan the difference or a personal loan can be given from another bank.
Many sellers who are “upside down” in their real estate are trying to attempt this option. On the surface, it seems very easy. The truth is, there are a lot of hoops to jump through and you may not qualify for it. I was working a short sale and had the buyers about two weeks ago. The president of a large local bank told me, “If we did it for these guys, then we would have to do it for everyone. That would say it’s okay to default on a loan you promised to repay and that’s just not right. We’ll foreclose on it before we’ll even consider short selling it.” On the other hand, some banks would far rather a short sale than to have to go through the expensive process of foreclosing. We’ve closed short sales and they do happen.
There are so many things that come into play on these that I will have to save them for a later time. Keep an eye out for more on this topic and I will try to link them together to make them easily found. If you have any questions, call us or email! We’re in business for you and are happy to help any way we can.