With the decline in home values in the past couple of years, some homeowners who need to sell in the current market find themselves trapped, as they owe more than their home is worth. In this circumstance, the short sale can become a feasible option.
A quick sale is only a sale where the proceeds are not enough to cover all of the outstanding obligations connected with the sale of the house such as the mortgage or mortgages, unpaid property taxes, attorney’s fees, title expenses, commissions, etc.. This deficit would require the seller to bring money to the closing or to negotiate a “shorted” payoff with their lender. The lender has no duty to agree with this, but many will. In most cases, a brief sale is tried by sellers that are facing foreclosure or have fallen behind and no longer possess the ability to continue making their payments.
There are a lot of misconceptions about the short sale process and the lender’s role in it, even among some Realtor®s. The seller’s lender’s role is nothing more than that of a contingency. This can vary by state depending on if it’s a title theory state or lien theory state. This information applies to Illinois, which is a lien theory state (the owner retains title and the creditor holds a lien on the property)
The seller owns the house and finally is the one who, with the assistance of their agent, accepts, rejects or proposes a counter offer once an offer is received. When the offer is accepted by the seller, it’s done so contingent on their creditor agreeing to take the net proceeds of the sale as full settlement of the amounts owed. I’ve had more than 1 event where an agent working for a buyer asks if their offer will be submitted to the bank, before the seller has agreed to accept it. It can add to the confusion when multiple supplies are received. Some think that all offers must be presented to the lender. This is not accurate. All supplies must be presented to the vendor, not to the lender. The goal of the listing agent should be to get the best offer possible, thereby providing the transaction the best possible probability of actually closing.
What are the chances of a successful closure?
Nowadays it is reasonable for banks to seriously consider accepting a short sale as, oftentimes, they net more money overall versus going through the entire foreclosure process, taking the house back and promoting it as an REO (Real Estate Owned). Some nations are non-judicial. Judicial foreclosures take much more time to complete. In Illinois, the process can take a year or more. There are a number of states which take upwards of 3 decades. When you consider that, typically, the bank is getting nothing while the procedure drags along, you begin to see their motivation to consider other choices. Add to this the deterioration to the property during that time along with the additional carrying costs, and the advantages to the bank become even more clear. The bank in this circumstance, much like the homeowner, is trying to find the ideal way to limit their losses.
The benefits of a Brief sale:
Lenders generally don’t enable the seller to receive any of the proceeds of the sale. This is fair when you consider that the entire basis of the short sale is negotiating with the lender to make them take less than what they’re owed. The only exception I have seen for this was years ago when, due to an error, we were out of balance by $.06 The title company actually cut a check to the vendor for six pennies! As a seller in this circumstance, one needs to keep in mind that, if the lender agrees to the short sale, they are allowing the seller to avoid having a foreclosure on their record which follows them around for several years. Additionally, most short sales also let the seller out from under the debt without being chased for a lack. These two things should be all the inspiration you need. There are no guarantees of being successful but it’s definitely worth the effort.
Who should you call?
These transactions aren’t for beginners. There is not any substitute for experience when it comes to navigating through this process. A seasoned agent and lawyer are crucial. In this situation it makes sense to ask a lot of questions. There are specialized short sale/foreclosure courses offered for agents. Some are very rewarding but these courses alone do not necessarily make the broker an expert.
Typically, it is going to cost you nothing unless there’s an upfront fee billed by the agent to record the home. All brokers negotiate their own fees. It should cost you nothing to speak to an agent and get information. All commissions and other closing costs a seller would usually pay will be factored in and, if the creditor agrees to the brief sale, they are agreeing to the net amount of the sale so essentially, it’s the lender that’s paying your closing costs. For someone facing foreclosure, Titusville Rat Removal can be an excellent solution.