Short sale is a term that we have heard all over the country in regards to real estate. It is a term we will be hearing for a while, so we might as well get to know them better. Short sales can be tricky to navigate; they are not are handled the way a traditional real estate transaction is handled, so here is a run down on some of the basics of a short sale.
What is a Short Sale?
A short sale is used when the owner of the property owes more on their mortgage or mortgages than the current market value of the property. For various possible reasons, the owner needs to sell the property. Since they owe more than the property is worth, a short sale may be necessary.
In this case, they would need approval of the lender to sell the property. The process of short selling is very complex and many factors need to be considered in deciding to go down the short sale road. Below are the things to take into account for both buyers and sellers since the process is different for both.
What To Do If You’re the Seller of a Short Sale
When deciding to short sale your property, it is very important to be keenly aware of what a short sale means for you.
Talk to your lender: The first person to talk to is your lender since they will be your partner and will need to approve a short sale in order for the sale to take place. If you are experiencing difficulty making payments, talking to your lender is very important.
Talk to your accountant: The second person to talk to is your accountant. A short sale can affect your taxes and you want to know how the deficiency will affect them.
Talk to an experienced short sale real estate agent: The third person to talk to is your Realtor. The process of a short sale can take 3 months or 2 years or longer, so you will want a committed Realtor on your side. The paperwork involved in a short sale can be 20 times more complex and time consuming, so you will want someone who is familiar with short sales to help navigate the short sale process.
Instead of buyer and seller negotiating the transaction, you have buyer, seller, and lender. All 3 must agree on the terms of the sale; the process is long and you will be required to submit many financial documents throughout the process, so be prepared to do a bunch of paperwork.
If you have an experienced short sale agent, they will walk you through the process. On the Realtor side of things, the work is also 20 times more time consuming than a traditional transaction, so it is important that the Realtor is experienced.
What To Do If You’re the Buyer of a Short Sale
Talk to you Realtor: As mentioned above, the process is long, so make sure that you have someone who has experience dealing with short sales to guide you through the process. Interestingly enough, it is more important for the listing agent of a short sale you are interested in to be knowledgeable than your buyer’s agent. If the listing agent is not familiar with navigating the short sale process, the chances of a successful sale can decrease.
Be prepared to wait and be patient: Sellers have little control of how the lender will handle the short sale, so they rarely can provide the answers that buyers have on things like timeline and what to expect from the process. Each lender is different and each transaction is different, so although the basics are the same, the length of time changes with each one.
If you have a timeline that you must adhere to, such as needing to be moved in by a certain date, short sales may not be the best option since neither you nor the seller control when it closes.
For Questions or More Information
Short sales can be a great option for you, so talk to your Realtor about everything you need to know. If I had to write everything here in one article, my fingers would be bleeding with everything you would need to know and it would be more like a novel than an article.
If you have questions, or are thinking of short selling your property, let me know, I have done many and can help you navigate the complex process. Email me, or continue browsing for more Hawaii real estate.
Kelly A. Lee, (R), e-PRO, CHMS
Hawaii Life Real Estate