ARE YOUR CLIENTS CONTEMPLATING A SHORT SALE PURCHASE?

While there are always active buyers in the real-estate market in Truckee and Lake Tahoe it seems many of them seem to be looking to buy a foreclosure or a short sale property.

The basic foreclosure is a fairly well-understood process and as "short-sale" signs pop up on occasion your buyer may wonder what it really means.

When a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner, it's called a short sale. Most often the lender forgives the remaining balance of the loan owned by the homeowner.

Who Really Wins?

Short sales are a combination of good and bad for the buyer, the seller and the lender.

As the seller a short sale is likely to damage your credit but not as roughly as a foreclosure. You will also walk away from your home without and money from the deal.

The buyer will get the property at a reduced price and it might have problems; and the new owner will need to go through considerable red tape to make the deal happen.

The lender will take a financial loss but perhaps not as large as it would have if it had foreclosed on the property.

There are two situations in which an attempt at a short sale is almost certain to result in failure ~

A. No default on loan. Lenders almost never will accept short-sale offers or requests for short sales until the borrower is far behind in payments and a notice of default has been issued.

B. Bankruptcy. If the seller has filed for bankruptcy, forget it. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy because negotiating a short sale is considered a collection activity, and collection activities are prohibited in bankruptcies.

Can it work for your buyer?

Buying a home in a short sale can be a mess of documents, questions and communication, so why should you consider it? Frankly it could be the low price you pay. You might get the property for a significant discount. Because the lender is eager to get back as much of the money it lent out as it can, you may also get favorable financing terms.

Because the sellers will likely play an active role in the short-sale process, you will have their cooperation. This is not always the case with a property that has gone through foreclosure.