Explaining Short Sales

Until a couple of years ago, short sales of houses were pretty rare occurrences. Most people had never even heard the term. The housing market bust changed all that. Suddenly home values plummeted, leaving millions of homeowners with an asset – their house – that was worth less than what they owed on it.

Now, if you had no plans to sell the house anytime soon, and if your job and income weren’t affected by the recession, this situation wasn’t too much of a problem. But people got laid off and couldn’t make payments, and they were facing foreclosure. Or they got a new job that required moving. They needed to sell the house. But that house that might have been worth $200,000 just a couple of years ago was now only worth $150,000, with maybe a $170,000 mortgage.

The short sale has become popular as a response to this type of situation. In a short sale, the homeowner sells the house for less than the mortgage amount, and the lender agrees to accept the proceeds from the sale as payment in full. The homeowner may not walk away with any cash from the sale, but he or she is also free of any mortgage debt. There is no cost to the short sale, either, since the real estate agents are paid by the lender out of the sales proceeds.

The advantage for the homeowner is not only in getting out from under that debt burden, but also in the fact that a short sale doesn’t affect their credit history nearly as much as a foreclosure would. A foreclosure is a serious stain on a credit record, and can keep a person from buying another house, regardless of their improved finances, for as much as seven years. With a short sale, the individual can buy another house within as little as 18 months.

People wonder why a bank or lender would agree to a short sale, since they end up losing money on the deal. The reason is, it costs a lender a lot of money not only to pursue a foreclosure, but to maintain an empty house afterward. There are months worth of taxes, lawn care, routine repairs and maintenance, homeowners association fees, and the danger of the house becoming a target of vandalism or theft. And after all that, the lender may sell the foreclosed house for less than it would have received in a short sale months earlier.

For a lender, then, the short sale is a chance to cut their losses and get the house off the books, freeing up money to make new loans.

A short sale can be completed in a few months if it is run by a real estate agent who is an expert at these kinds of sales, as Oyezz Real Estate is. The homeowner doesn’t need to invest money they don’t have to fix the place up before the sale, and even if there are second mortgages or other liens on the house, it doesn’t really matter.

The agent’s expertise is the key factor in a short sale. The agent negotiates with the lender on the homeowner’s behalf, and that negotiation is a challenging process. You have to know who to talk to and what to say to make a short sale happen, and how to set the price so that it attracts a buyer but isn’t so low that the lender won’t go along with it.

Not every short sale succeeds, but most sales that Oyezz takes on and manages do pay off for the homeowners involved. They are a far better option than foreclosure.

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