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• Real Estate Short Sales

Curious How a Short Sale Works?

by: Paul Rowe

Here in the Las Vegas area where we have one of the highest foreclosure rates in the country, many homeowners have been desperately trying to find a way to stay in their homes. Loan modification is usually the first step. Up to this point, getting banks to make mortgages more affordable in an area where values are 50% less than they were three years ago has proven to be fruitless in most cases. If it weren’t, people would be modifying and staying in their homes instead of walking away. In reality, loan modification has been a dismal failure.

If you are unsuccessful with your loan mod, don’t walk away, try and sell it for less than what you owe on it by using a technique known as a short sale. A short sale is a very simple concept. The owners get their bank to approve a sale of their home to a buyer for less than the amount the seller owes on the mortgage.

Short sales have always existed, but the difference this time around is the unprecedented mass of distressed sellers attempting to perform a short sale. This glut has placed additional burdens on an already reluctant banking industry. These banks are finally getting on board with the realization that short sales are a far better alternative for not only the real estate markets affected, but the banks themselves.

Short sales are a terrific method of disposing of toxic assets because the home is sold directly to an end buyer. The seller is relieved of an unaffordable mortgage, the buyer gets a well-priced product, the neighborhood the home sits in recovers quicker, and the pesky banks do not have to take possession nor are they responsible for the care and management of a home. How does it make sense for a bank to take back property simply try and resell it? That makes no sense when it could have already been sold to a buyer via short sale, leaving the bank out of the property management business!

Here is what you need to know in order to sell your home on a short sale:

Exhaust your other options first. Loan modifications, forbearances etc. You can always speak to a real estate agent in preparation for a short sale, but you should not move forward until you’re ready to commit 100%. This means no looking back once started.

Your bank will require you to list the property with a licensed real estate agent. Loan modification can be performed by the homeowner-- short sales cannot. The reason why is they need to be assured the home was exposed to the full market in order to bring the highest price possible to increase the bank’s bottom line. They won’t allow a For Sale By Owner to do a short sale.

Look for a real estate agent who specializes in short sales. This is a transaction which can affect your life for years to come, so get a professional. This is not a normal market; hiring a part-time real estate agent friend or relative is like calling in a mall cop to handle hostage negotiations.

You’ll need both tax advice and legal advice. Here in Nevada attorneys are not required in real estate transactions like they are in many States; however, since there are serious implications you need legal advice. If you don’t know one, your real estate agent should be able to at least provide you with a reference. Whom you choose will be up to you. For tax advice, a CPA or tax attorney can advise you on potential tax questions.

Do your homework. Continue to investigate short sales, but don’t get paralyzed in the research. You need to act in order to avoid foreclosure. If you’re not sure and are overwhelmed, at least make a call to a professional. They can guide you on the process, leaving you to free to focus on making decisions.

To find out more about short sales and if it’s right for you, give us a call at 702.376.0088.

Paul Rowe manages over 40 short sales listings for North American Realty of Nevada.

Please call today at 702-376-0088.