Myrtle Beach Real Estate by Mirela

What Is A Short Sale? (Short Sale for Dummies version)

OK!  So my well versed investor who has turned about 7 properties with me in the past 4-5 years, e-mailed me back asking what a short sale is.

For those of you who are wondering about the same thing, here is my understanding of it: 

A SHORT SALE is when a bank agrees to sell the property for less than the amount owed on it.  If an owner goes into foreclosure, and the bank agrees to a short sale, the property is listed with an agent and posted as a short sale.  The bank looks over all the offers and accepts the most palatable one.  If the bank accepts a short sale, the foreclosure is not brought to fruition (it's stopped).  The owner does not garner a foreclosure on his credit record, or a deficiency judgment chasing after him for a lifetime (ouch, our state is a deficiency judgment state!)

Say the owner bought a property for $ 200,000, which is now only worth $ 150,000 on the open market.  If the owner put only 5% down (95% LTV) when he acquired the property, the amount owed on it is around $ 190,000.  If the bank agrees to take $ 140,000 for the property under a short sale, the bank loses the difference ($50,000 plus the cost of sale).  Losing money is not something banks like to do, but "cutting losses" is certainly a concept businesses and savvy investors comprehend.  It's not good, but it's the better of the two choices....  Foreclosures are expensive, and banks have less control over the outcome.  Short sales are sort of "the bird in the hand..." concept.

Is this simple enough? 

Your Myrtle Beach Real Estate Connection, Mirela Monte

http://www.myrtlebeachhomes.us/

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Comment balloon 15 commentsMirela Monte • January 03 2008 07:27PM

Comments

very nice, Mirela--clear and to the point.  Again I say nicely done!
Posted by Faith LaRosse, Serving Berks, Chester & Montgomery Counties (Springer Realty Group) over 11 years ago

I find this article interesting seeing how I have a listing that is a short sale and there are some major differences from a regular listing by a homeowner. Most notably, you deal with the bank with offers which can be less stressfull because banks are generally more flexible than homeowners.

Posted by Nicholas Beltrani (Appleseed Realty GMAC Real Estate) over 11 years ago
A very good explanation of a short sale. As you know, they are easier to explain than accomplish.
Posted by Wayne B. Pruner, Tigard Oregon Homes for Sale, Realtor, GRI (Oregon First) over 11 years ago

Yeah, Nicholas, try to get the seller to bring $ 50,000 at closing!!!  LOL

 

Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) over 11 years ago
Thank you, Wayne!  The accomplishing part is another blog.  I have some great ideas for that.  Have you subscribed to my blog yet?
Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) over 11 years ago
Thank you Faith!  I sincerely appreciate that!
Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) over 11 years ago
Mirela, they also used to give the homeowner a 1099 form for the income tax difference between the short sale price and the market value, but now that is forgiven with a new law. Maybe you could write another blog with that updated info. Sometimes depending on the state a short sale STILL damages your credit, just not like a foreclosure.
Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 11 years ago
Gary, you are so GREAT !!!  Thank you so very much for that input.  Right you are! 
Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) over 11 years ago

Very well put!  Bravo!  Beautifully said! 

Annie!

Posted by ANNIE MORSE (BUYERS' CHOICE REALTY) over 11 years ago

Thank you Annie!  As you see, I'm up to no good...  On AR again...  I am addicted!

With two more clients to follow up on and three more bills to pay, and what do I do?  Blog again!  I should get penalized for blogging.  I like it too much! 

Gary had such a great point.  Well worth the blog, when I garner  such good information from generous AR members.  I love this AR community!

Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) over 11 years ago
just be sure your seller is aware of the possible 1099 that they could get from the short sale.
Posted by Scott Wall (StoneHouse Realty, Inc) over 11 years ago

KISS Keep IT Simple Stupid I always say, nicely done quick and to the point.  If someone needs to know more they can contact you.  Good bait!

Posted by Jeffrey Dolfinger, NRBA Member (24/7 Realty Inc.) over 11 years ago
Mirela,
Short, sweet, and easy to understand!  Nice description of a hot topic!
Posted by Kristin Small, REALTOR -GRI, Myrtle Beach Real Estate (RE/MAX Southern Shores) over 11 years ago

Now if only the concept was as easy as the process....

Posted by Christine McInerney, The McInerney Team, Knoxville TN Homes For Sale (Great Life RE) almost 10 years ago

Distressed sellers are like wounded fish; they tend to bring out the sharks.

Posted by Inna Ivchenko, Realtor® • Green • GRI • HAFA • PSC Calabasas CA (Barcode Properties) over 2 years ago

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