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Because of the market turbulence, many times a homeowner has to sell his or her home for less than is owed to the lender. This can mean bringing a check to the closing table. What if there is no money to do this? Oftentimes, a homeowner will hope that the lender accepts what the home sells for, and forgives the rest of the debt. This is called a short sale, and the video above is a quick introduction by one of my friends.

I attended a seminar sponsored by the WCR yesterday, and the facts that were tossed at us were sobering. An attorney who works for one of the major servicers in the state revealed that these lenders look at appraised value, and have decided that an offer below 76% of that value will not be accepted- that the lender will make more if the property goes to foreclosure, particularly if there are secondary lienholders.

Whether this is unrealistic, or pennywise-pound foolish, isn’t the point.  This is what homeowners are dealing with: standards that are already in place that they will have to accomodate if there is any chance that they are to sell their home.

Sellers: one thing that we have found- and I have spoken with other REALTORS who sell short sale homes- is that the chances of an accepted offer increase if there is an attorney involved. Ask your agent. Another thing that is helpful is to be scrupulously honest with your real estate agent about any loans taken out against the home, and anything else that would need to be taken care of at the closing table, to avoid any unpleasant surprises.

Buyers: you ARE likely going to get a bargain on the home, but you won’t be purchasing it for pennies on the dollar, as is sometimes intimated. However, this bargain will probably be coming warts and all, since the homeowner will not be in a position to address the issues found at home inspection. You will also be working on the lender’s timetable. There will likely be a long time before the offer is accepted- and it needs to be accepted by the lender, and then the process happens more quickly than in the typical home sale.

I have read on some forums that success rate for short sales can be as low as 30%. This figure can approach 90% if your agent has experience, and if the right people are involved. Like everything else in life, it is important to do your homework- and this is difficult to do when you are in the midst of dealing with something as stressful as selling your home for less than you purchased it for.

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