For many potential first-time and repeat home buyers, the term â€˜short saleâ€™ is commonly used, but rarely explained. In a nutshell, when a lender accepts a payoff amount of less than what is currently owed on a property, this is called a short sale.
Maui Short Sale Example
Letâ€™s say that Joe is at risk of defaulting on his Kihei home on which he owes $400K, but Joeâ€™s home is currently valued at $300K. The lender, Bank of Sunny Hawaii, can accept an offer for $300K and write off the loss.
Why would a lender/lien holder be willing to accept less than what is owed? Well, there is a old adage in investing, â€œYour first loss is your best loss.â€ By accepting less now, the lender reduces the legal expenses of foreclosure proceedings and the risks of the property not selling quickly, which is of particular concern in a declining or volatile market.
For those considering buying a potential short sale property in Maui, it is important to note that the process is long and full of uncertainty. Although the seller may accept the offer, it is ultimately up to lender to accept such a loss. In addition, it can easily take upwards of 6 months before acceptance.Â However, for those willing to wait, patience will be rewarded by significant savings off market value, translating into instant equity.
For example, in the last six months, the following short sale transactions have closed:
- A Maui Meadows home with a listing price of $795K sold for $700K (88% of list price).
- AÂ Ke Ali’i Kai home with a listing price of $875K sold for $716K (81% of list price).
- A Maui Vista condo with a listing price of $239K sold for $200K (83% of list price).
- A Kihe Villages condo with a listing price of $175K sold for $145K (82% of list price).
To put it in perspective, the average list to sales ratio for conventional sales is around 95% (with slight variances dependent on market conditions). Having an experienced Realtor negotiate on your behalf can be the difference between a smooth, profitable transaction, and one mired with uncertainty and problems. Contact us for additional information and/or for a current list of Maui short sales.
Sellersâ€”Is a short sale for you?
Selling your home can be an emotional experience, particularly if it is under stressful conditions. The short sale process is complex and lengthy, where having a team of experienced professionals can make the ordeal more bearable. Keep in mind that by short selling a property, you retain some control over the sale and you are avoiding foreclosure proceedings, which would have a negative effect on credit ratings for 7-10 years.
If you would like a Short Sale and Foreclosure Resource (SFR) certified team member provide you with a professional and discreet consultation, contact Mariah at (808) 385 4955, Mariah@hawaiilife.com or Alex at (808) 385 5034, email@example.com.