What does it mean when a home for sale is a “short sale?”
Over the past few years and as the popularity of “short sale homes” have increased their presence on the market, I have been increasingly at fault for utilizing the technical term “short sale” in conversations with enough home buyer’s and seller’s to detect just how unfamiliar the general public is with the definition of a “short sale”. I am also somewhat chagrined to use such jargon without further explanation when I pride myself on being a clear and patient communicator with my clients in order to ensure their comfort during the normally stressful home buying / selling process.
Which leads me to the explanation of why I decided to write this article in layman’s terms with the intent of offering the clarification geared toward the average home buyer who is often intimidated enough by the home buying experience independently and unaccompanied by additional complexities like the current unusual conditions such as “short sales”, “foreclosures” and other atypical circumstances real estate transactions are beset with currently in the market.
* o Q: What does it mean when a home for sale is a “short sale?
A: A home listed for sale is considered a “short sale home” when the home being offered for sale is offered for sale at a listed price which is actually less than the amount the owner/seller of the home owes on the loan(s) attached to the home. For example, let’s say you purchased a lovely three bedroom two bath pool home in the year of 2005 for a sale price of $300,000 (which at that time was the fair market value), and let’s say you paid 10% of the purchase price as your down payment, acquired a loan/financed from your bank the 90% ($270,000) remainder to complete the purchase. Now fast forward and you arrive here in the year 2009.
Just this week you learn that you must sell your home immediately because you are being transferred from Florida to California for work related reasons. At this time you get over the initial panic and decide to call your local Realtor/Sales Associate in order to get a consultation to go over the sale of your home. As you are sitting at your dining room table with your spouse and your Realtor ,your real estate agent with a calm but concerned demeanor reviews the comparable market analysis to determine the price that your home would likely sell today, you are then informed that you will be lucky to sell your beautiful three bedroom, two bath, pool home for $150,000 in today’s market. Your immediate reaction is, “What? How is this possible?.” (or maybe something more colorful), you realize that due to the fact that you still owe $200,000 in remaining principal to your bank, which means that without taking any other closing expenses into consideration you will need to bring a check in the amount of at least $50,000 to fork over to your bank at closing! What are you going to do you wonder?!
Your options seem little as you have no choice but to relocate where you were assigned by your employer, you wonder what options do you actually have? Luckily, a few options do exist for a seller in this position. The solutions I have most often seen occur are either, the seller brings the remaining $50,000 check to closing and pays the owed amount to their bank/third party, or if the seller cannot afford to make good on the difference at this time and only under certain circumstances the bank/third party will then issue or agree to separate arrangements for the remainder of the deficiency to be paid back after the sale of the property or release the seller from the full or partial liability of the deficit. The buyer on the other hand is able to purchase the home at today’s market value of $150,000 regardless of the fact that you had a loan of $200,000 still owed prior to the sale.
* o Q: Who can sell your home as a short sale? Who pays the closing cost to your Real Estate broker and other expenses?
A: A licensed Real Estate broker can in most situations sell your home as a short sale if your individual circumstances meet the criteria necessary, which are mostly determined on an individual basis and by you and any third party to which payment of loan is owed – usually one or more bank(s). Your Real Estate associate/broker can also at times assist you in preparing and/or delivering the appropriate documentation to be submitted to the necessary third party(s) in order to have your situation reviewed, analyzed and possibly approved for selling your home as a short sale. The payment of services provided by your Real Estate broker, your Real Estate lawyer and your CPA can also at times be paid by the third party(s) holding the loan(s) owed on your home.
* o Q: Can investors/ owners of a second home also sell their property as a short sale?
A: Without getting too in depth the answer is, Yes under certain circumstances.
Because each seller’s situations is unique it is best to have your individual circumstance evaluated by your local Real Estate associate/Realtor who has experience and knowledge in the area of short sales and to also consult with your Real Estate Attorney and CPA for any legal and/or tax advice.
If you are wondering whether a short sale is an option for you and you are inquiring in reference to Florida Real Estate or if you just have additional questions or comments please email me at Jamie@jamiesellsstpete.com . As a Realtor/Sales Associate with RE/MAX Metro in Saint Petersburg Florida I am here to answer Florida specific Real Estate questions.
The purpose of this article is to provide an explanation in a brief non technical summary format in reference to the short easy to understand definition of a short sale with regard to home sales in FL and FL Real Estate and should not be construed to imply legal, tax or situational advice. For legal or tax questions please consult your attorney or CPA respectively.Immobilienmakler Heidelberg Makler Heidelberg
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Source by Jamie M Schaefer