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                                                                   Short Sales help in Staten Island, NY
 
                                                                                                               SELLER AND BUYERS get confused when talking about a short sales
.
                                                                                                               It's actually simple...unlike bank foreclosures, where the homeowner defaulted on the
                                                                                                               mortgage and the bank has taken back the property, a short sale happens when the
                                                                                                               homeowner still has control of the property, but is seeking relief from the total mortgage
                                                                                                               balance due the bank.


Short sales usually are a result of the homeowner being underwater (meaning more is owed on the mortgage than the property is worth), and the market cannot recapture sufficient funds from a sale to pay the balance.
But, it can also be the result of financial hardship, a job loss, medical bills, or over borrowing by putting additional mortgages on the property. Government liens can also reduce the amount of money settled from a short sale thereby leaving less money for the mortgage balance. 

In most cases, a homeowner seeking short sale relief, is still occupying the property, but is probably applying limited amounts of money to expenses. And although the mortgage is still running, short sellers are known to stop paying many bills and even their mortgage payments if things are that bad. Some owners have been known to stop making mortgage payments, so they can prove that they’re really in a financial bind. This does not help their situation as penalties are added into the mortgage balance, thereby making the amount due even greater. 

The real story behind a short sale property is that the burden to get agreement from the bank to take less than the amount owed it, is on the homeowner and not on the bank. To protect the bank, there are short sale documents required by the bank, which must show that 1), no proceeds from the sale are going to the seller, and 2), that the seller has no assets to make up any shortfall. This is a gray area, due to the fact that the information between both parties is subject to honesty and verification. This issue itself is a prime reason that short sales can take a lot of time to get approval from the mortgage holder. 

Many sellers just want to get away from a house, and think the short sale route is the way to go. It’s not that simple. If a seller uses the underwater situation to get a bank to take less, it usually has to be proven that the property’s overall value is verified through the appraisal process. If the value is greater than the amount being negotiated between the owner, the bank and the buyer, the bank will balk at a sale under these conditions, and want the property sold for more. This happens more or less depending on whether the area is showing a rise or decline in selling prices. Short sales don’t mean a house has to sell for less, it just means the owner will have less to give the bank, becoming a short sale.

Short Sale transactions can be filled with potholes, especially for the buyer. This is due to the fact that a buyer is negotiating not only with the homeowner, but the bank as well. The homeowner may be happy with the sales price, but the bank may not. Thereby, the process begins.

1. It can take a long time finalize a short sale. Normally when you make an offer on a typical house, you'll hear back within days, or even hours. But banks move very slowly these days because they are overloaded with cases. You might wait 30 to 60 days for a response, perhaps longer if there's a second mortgage on the property and therefore a second bank. The total process can easily take as long as six months from start to finish. "For someone moving a family or relocating that kind of timeline is incredibly unrealistic”.

2. Your offer can't be contingent on selling your current home. Banks generally won't accept offers on short sales if they're contingent on selling your current house to get the funds you need. "Even if the buyer is already under contract, there are just too many things that can go wrong." So unless you're a first-time homebuyer, or you don't need the equity from your current home, or you're a real estate investor, it's unlikely that you can make a short sale work for you.

3. It's an as-is sale, or maybe not. Banks also typically won't consider short-sale offers that have inspection contingencies in them. Repairs usually have to be worked out between the buyer and seller beforehand. So a buyer should do a house inspection before paperwork is sent to the bank. A buyer could spend $500 on the chance that a deal acceptable to all can be made. It’s the risk the buyer takes, and you probably wont get the homeowner to reimburse you for your expenses if the bank rejects the deal.

As long as you're prepared for these hurdles, you may just land yourself a bargain, or not. There’s no guarantee that because you bought a short sale, that you saved a lot of money. But make sure to work with a Realtor who knows the ins and outs of the process and can protect your interests throughout the negotiations. But you should remember that Short Sales aren't necessarily identified on the Internet, but local MLS data usually indicates that the property is a short sale. You need to ask your agent whether a house is a short sale before looking at it.

If you find a house that's a Short Sale, and you just have to have it, make sure to get yourself a mortgage pre-approval -- another short-sale requirement. Work out
your offer with your real estate agent, allowing for give-and-take negotiations. Don’t low-ball too far below the asking price, because your probably going nowhere with that.  When the bank finally replies, it will more than likely counter with a value they or their appraiser puts on the property. Offer them somewhat less than that, and work from there. You’ll know what you feel the house is worth to you, and that’s your purchase price. 


Sometimes you will hear that it is a “pre-approved short sale”. This means that somewhere during the listing history, there might have been negotiations that arrived at an agreement price, but didn't come to closing. That number might remain the same, but you cannot always depend on it. Banks periodically update their value conclusions without anyone knowing, and raise the bar on the property.

Your agent can put language in the offer letter stating that if you don't have a response by a certain date (perhaps 60 or 90 days out -- however long you feel like you can wait), you have the option of retracting the offer. That gives you an out, just in case. However, because many short sales fall by the wayside, lawyers have been known to charge an up front non-refundable deposit to represent you in a short sale contract, just in case they have nothing to show for their efforts.

Short Sales are a way of life in these economic times. They can be good, or bad. Because each short sale property has it's particular issues, there is really no way to determine the outcome. But what can be of great use to a buyer, is they the work with an agent with short sale experience. This type of agent can help cut through some of the obstacles and make the process easier.  Contact us for assistance with Short Sale properties




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