What's the problem with short sales?

Between adjustable rate mortgages pushing homeowners into foreclosure and the foreclosure crisis itself pushing home values down, millions of homeowners are either currently underwater or will soon be underwater.  In fact, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody's Economy.com. If the homeowner can afford to pay their mortgage then there is no problem because there is no need for a short sale.  The problem comes into play when the homeowner needs to sell their house.  Since very few buyers are willing to pay more than market value for a house; and, with the number of homes on the market today, the small number of buyers out there are looking for deals. So, what generally happens is that the homeowner lists the property with a real estate agent and waits for a buyer.  If they're lucky a buyer will be found and the agent can submit a short sale package to the bank.  Lenders will not review a short sale package until there is a buyer for the property. The reason behind this is that if there is no buyer then there is nothing to negotiate.

A short sale package basically explains to the bank why they need to accept less than what is owed on the property.  In addition, the homeowner will net zero on the sale, but will avoid having a foreclosure on their credit report.  Lenders so far have agreed not to pursue deficiency judgments for the time being which means that the seller will not have to pay taxes on the portion of the loan the lender has forgiven to make the short sale work.

Once the short sale package is submitted it will take on average another 3-6 months for the bank to review the short sale application.  This is why very few short sales end up working out.  By the time the bank gets to the short sale package the buyer has already found another bargain property.   The key to a successful short sale is working with a real estate agent that not only knows the market very well and can find a buyer quickly but also has the ability to successfully negotiate the short sale with the lenders and other lien-holders so as not to lose the buyer.

HomeplexNation can help homeowners and real estate agents successfully negotiate a short sale at no cost.  Learn more about this valuable free service.