After the subprime mortgage bubble burst, more homes went into foreclosure and were sold in short sales in Florida than in any other state in the union. By 2016, the housing market began to improve, but some homeowners would still benefit from a short sale at this moment. In order to obtain the best deal possible, homeowners must hire an experienced and competent realtor like realtor cary, but they also need to understand exactly what a short sale is and how the process works.
What Is a Short Sale?
A short sale is also known as a “deed in lieu of foreclosure,” and it is when someone sells a house for less than he owes his lender. The owner in question has a mortgage that he must pay, but he receives permission from the lender to sell the house even though he cannot sell it for the full amount of the loan. People are forced to do this when they are experiencing financial hardships that are making it impossible for them to continue with the payments on the house.
Because the seller would receive less than he owes the lender, the proceeds from the sale will not cover the entire amount owed, but the lender agrees to accept this amount. In order to arrange a short sale, a seller would need to take care of home buyer document preparation in advance, preferably with the help of a professional, as well as have his property appraised.
How Does Foreclosure Affect a Borrower?
Foreclosure can have deleterious effects on the borrower, so a short sale may be the best option. For example, a foreclosure will lower a borrower’s credit scores so much that he will not be able to obtain credit for a very long time. Approximately one month after a lender initiates foreclosure proceedings, the foreclosure will appear on the borrower’s credit reports, and it remains on the reports for seven years. The damage that a foreclosure can do to a person’s credit report varies. If the report already has several missed payments and other negative entries, a foreclosure can make the situation untenable.
How Does a Short Sale Work in Florida?
Step 1
A short sale is not always the appropriate action for every seller. For this reason, the seller has to determine whether or not it would be right for him. Several people have to agree to a short sale before it can occur, so the seller has to enter into intensive negotiations with several people. This first step can take a long time, so the seller needs to be patient and willing to accommodate the other parties.
Step 2
Lenders often agree to short sales because they are a way for them to rid themselves of distressed properties. That’s why they are likely to accept a short sale. They will receive their money quickly and in the simplest manner possible. Therefore, a seller would need to be approved for the short sale, but if he cannot receive approval, the lender must pre-approve the process.
Step 3
After becoming approved, the seller must find a realtor with experience executing short sales in Florida. These realtors have experience negotiating short sales so that the seller receives the most favorable outcome.
Step 4
After someone makes an offer on the property, the proceedings will be similar to those of a normal sale, and the potential buyer will make an offer.
Step 5
It will only take a couple of days for the seller to accept or reject an offer, but it will also depend on whether or not the lender accepts the offer.
Step 6
The most difficult time is when the lender is deciding whether or not to accept the offer. At this time, everyone is asking the lender to release her lien on the property although the sales price will not be enough to cover what the seller owes the lender. The most important thing to the seller is that he is released from all liability to the lender if the sale is approved.
Step 7
If approved, the house will be appraised, and everyone involved will discuss what the terms of the sale will be.
Step 8
After the lender accepts the offer, the sale will move forward as home sales usually do.
How Does a Short Sale Benefit a Seller?
The seller benefits immensely from a short sale. For example, if a homeowner is having difficulties making his monthly payments, the lender has the ability to begin foreclosure proceedings against the homeowner and then sell the property.
During the foreclosure process, the lender takes possession of the property after the borrower defaults on the loan. Then, the lender is entitled to sell the property to obtain the amount that is still owed on the loan. In the event that the lender cannot sell the house for an amount that covers the entire loan, the borrower could owe the lender the balance. A short sale will avoid this scenario and will keep a foreclosure from appearing on the borrower’s credit reports. In addition to that, the borrower will not have to pay the balance that is left over on the loan.
A short sale also benefits the lender. It is very costly to begin foreclosure proceedings against borrowers, but a short sale avoids this process.
The buyer of the property also benefits from a short sale. Short sales allow buyers to purchase houses that are below the fair market value. In addition to that, they will be purchasing properties that are in relatively good condition because the homeowners are living on the property at the time. When the bank takes possession of a house and sells it in foreclosure, it is usually in disrepair.
A Short Sale in Progress.
It can be challenging to sell a home in a short sale. For example, one house was on the market for two years in Florida. To make matters worse, the market was depreciating at the time. A buyer offered to purchase this property for $12 million, but the lender was hesitant to agree to the sale. Fifteen months passed, and the seller decided to sell the house for $280,000 less than the original asking price. Why did this occur?
Everything was in order. The appraisals supported the offer, and the lender had everything he needed to make a decision. The buyer was anxious to purchase the house, but the lender was unable to allow the sale to go through because he wasn’t willing to take less than the borrower owed and release him from the obligation to pay the balance of the loan.
After 15 months had passed, the realtors hired a negotiator to work with the lender, and the negotiator was able to move the process forward from signing the contract to closing the loan in a matter of 60 days. The lender accepted the $280,000 loss and released the borrower from any obligation to repay the balance.
Lenders and Short Sales.
Now, lenders are much more eager to allow borrowers to sell their homes in a short sale. That is because many lenders have a large backlog of foreclosures, and they are willing to allow their borrowers to sell their houses for less than they owe the lenders and forgive their balances. In fact, some lenders are so anxious to rid themselves of properties in short sales that they will offer their borrowers as much as $35,000 to agree to a short sale. The borrowers are free to do whatever they like with this money.
Seeking a Short Sale.
The first thing that people must realize is that they will not have a guarantee that their lenders will agree to a short sale. It is true that some lenders will be willing to allow it, but in Florida, short sales have been decreasing since 2009. People still have the opportunity to sell their houses in short sales, but they aren’t nearly as plentiful as they used to be. This is good news as well as bad news. For example, fewer short sales mean that the real estate market and Florida’s economy are improving, but it also means that a homeowner may not be able to sell property in a short sale.
Hire the Appropriate Realtors.
The realtor a homeowner hires must have an extensive amount of experience with short sales in Florida. Experienced realtors know how to keep the negotiations going by being persistent. Negotiations between the realtor and the lender are needed to ensure that the short sale will come to fruition. The realtor must also have extensive knowledge on the value of Florida homes so that everything can be completed without difficulties. If you’re looking for homes for sale, you can also look up the internet.
Be Prepared to Wait.
In some cases, short sales can be completed in as little as two months, but in most cases, it takes as long as 180 days. This amount of time will be taken in negotiations between the lender and the seller and will mainly be centered around how much money the lender is willing to accept.