A short sale is a process by which a homeowner can sell a house for less than the mortgage(s) or liens on the property. If more money is owed on the house than it is worth, the house can still be sold if the sale is approved by the lienholders on the property. The bank will sometimes pay the Sellers’ closing costs, including their realtors’ fees, the realty transfer fee, and the attorney’s fee. The amount of the mortgage or lien that remains unpaid is usually forgiven by the lender, but this is not always the case.
From a Buyers’ perspective, there is some risk and need for flexibility before getting involved in purchasing a short sale property. The need for flexibility comes from the fact that short sales can take months to be approved. The risk is that expenses are incurred on inspections and mortgage applications while waiting for short sale approval and the transaction may eventually need to be terminated if not approved. In addition, it is unlikely that the Seller in a short sale transaction will be able or willing to make any repairs to the property or provide any credit to the Seller to satisfy their concerns from inspections, so it is likely that the inspection will be for informational purposes only.
For the Seller, the short sale process is much more involved. The sale price must be approved by the lien holder. If there is more than one lien holder on the property, all of them must agree to the terms. There is no guarantee that it will be acceptable. The proposal must be prepared and submitted by the Sellers attorney, and it could take months to obtain approval, with no guarantee of success. However, a short sale may be an effective means to avoid a foreclosure. Although the sellers’ credit score will be negatively impacted by the short sale, the negative impact of a foreclosure is significantly greater.
At Petriello Law, we are experienced in short sale transactions and are ready to help you navigate the complicated process. Please call us today to discuss your specific circumstances.