Many people have heard of the term "Short-Sale" on T.V., the radio, from a friend or family member, or read about it somewhere. Even more people have done a short-sale without entirely knowing what is really is, or what is means for them or their family. At Green Day Realty, Inc. one of the many aspects of Real Estate we highly specialize in are Short-Sales.
Consumers (and we mean people buying or sell their property) tend to stay away from short-sales because they know little or nothing at all about them. Even many Realtors, brokers, and agents have a hard time understand what a short-sale is, or how it can affect the consumer. It takes a tough seasoned professional in the industry to deal with a short-sale, make sure each step is done properly, and can cleverly negotiate with the banks. The process isn’t a quick one. There’s no “30-day turn around” or “quick sale” of the property. This is one HUGE reason so many Realtors, brokers, and agents stay away from short-sales; because the money isn’t as fast as a conventional sale, and it “takes too long”. It takes a seasoned professional to deal with this process and be there for the client or clients. It’s not easy, but it’s a worthy alternative for the borrower. THAT’S WHY WE DO IT!
So we designed a page to help educate all those you don't know much or anything about a short-sale. This way each person can make an informed and educated decision whether or not a short-sale is right for them.
A short-sale is a sale of real estate for less than the dollar amount of the balance of the debt owned (the Lien/Mortgage) against the property, and the property owner cannot repay the full amount of the lien, and whereby the lien holder (bank or other financial institution) agrees to release their lien against the property by accepting less than the amount owed to them.
That is the straight definition of a short-sale. So what do we have?
Typically a short-sale does not release the borrower from the obligation to repay back the debt owed. However, in California laws were passed to release the borrower of the remaining amount. Specifically legislation SB 931 and SB 458, and a more detailed outline of the laws can be found in the California Code of Civil Procedure Section 580e. It's like being forgiven the the balance you owe on your mortgage - eventhough the banks don't want us to put it that way.
(Click on the links above for more information).
Short-sales are used as an alternative to foreclosures because it reduces the costs to both the borrower and creditor. You may ask, “Well either way I’m going to lose my property, why should I even bother going through the short-sale process, I’ll just let the bank foreclose on it?”
It all comes down to your credit and future eligibility for another mortgage. A foreclosure will keep you from obtaining a loan for 5 years, whereas a short-sale is only 2 years.
Let’s face it, not everyone will need 5 years to bounce back from a bad financial situation. On average it takes anywhere from 6 to 14 months to become stable once again. That’s why the short-sale process is so wonderful and different than a foreclosure, because it allows you to be able to become eligible for financing again sooner.
Let’s think about it this way: You obtained a loan for a property during a time when property values were climbing to record highs, at record speeds and now your property doesn’t have that value anymore and you owe more than it’s worth; or at a time when the payments were easy to make. Now, for whatever reason, you are unable to pay the mortgage payments anymore, have fallen very behind in payments, or you are currently making payments but the payments are causing financial hardship on you (the borrower) and your family. You want a way out of the current situation, so you might try selling your house. But market value of the property today is less than what you owe on it, therefore no one is buying it. What do you do?
You can either let it go to foreclosure and wait 60 months (5 years), or short-sale and get your life back after 24 months (2 years). It is our opinion that a short-sale is much better for your credit and life.
A short-sale will affect your credit score by about 200 points negatively, and will make you ineligible for another loan for about 2 years (24 months). However, in some states including California, the remaining balance of what you owe is forgiven.
The length of a short-sale process is never known for sure, but usually can take anywhere from 3 months to 18 months, some cases more. At Green Day Realty, Inc. we have an average of 3 months from listing to funding. Granted each case is different but the steps remain the same.
We start with determining whether or not each case is eligible for a short-sale. Among many criterion, we look at the current financial situation of the person responsible for the mortgage (borrower), perform a property evaluation, and try to exhaust all other options first.
We then successfully market the property and receiving potential buyers. Once we have an offer or offers we submit to the bank to get an approval from all involved parties (i.e. the 1st mortgage, 2nd if it exists, and any other debts). Then the extensive negotiations begin. This is the lengthiest part of the entire process, however, at Green Day Realty, Inc. this is where we always shine.
Once we have the necessary approvals we will determine the fair market value of your property by ordering valuations of the property against recently sold homes comparable to your property. Depending on the findings, the lenders may counter our submitted offer based on the fair market value. This is all part of the negotiation process.
If all parties, such as the buyer, seller (which becomes the bank), and any other debt holders, agree on the terms of the offer, the short-sale will be approved and the property will be sold.
The process may be confusing and sound complicated, but that’s why only seasoned professionals perform short-sales. You can rest assured that if you choose Green Day Realty, Inc. for your short-sale, we’ll do all that’s possible to help you.
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