Confused Home Seller in Escondido

Dear Melissa:

My loan amount is $425,000 and my real estate agent believes that my property can be sold for $440,000. I’m selling for more than I owe the bank, but I have been told that my transaction will be a short sale. That doesn’t make sense to me. Can you explain? –Confused Seller in Escondido

Dear Confused Seller in Escondido:

I can understand why you would be confused about this matter. After all, you really do owe the bank less than the estimated purchase price on the property. However, in the sale of a property, there are many other costs associated with the transaction. They include real estate commission, property taxes, HOA transfer fees, pest control fees, recording fees, title insurance and settlement costs among other fees. In the scenario you described, if the total costs are less than $15,000, then this would not be a short sale.

Keep in mind that costs associated with a property sale usually amount to between 6 and 8 percent. And, if the buyer has asked for some seller concessions, it could be more. So, it is highly probable that despite the fact that the loan amount is less than the sales price, you will be short money to close.

But, is this a short sale? Well, if you (the seller) can bring the additional funds required to close the transaction, then this would not be a short sale and mortgage lender approval would not be required. However, if you have no funds to bring to the table, than this would likely be a short sale and would require mortgage lender approval in order to close.

It sounds like you are getting good advice from your real estate agent. Best wishes in the sale of your property. If you have any questions, please do not hesitate to give me a call. --Melissa