Short Sales Explained: Why Banks Will Accept Low Offers
http://www.setthestageforsuccess.com/articles/17245/1/Short-Sales-Explained-Why-Banks-Will-Accept-Low-Offers/Page1.html
Fred Sed
Fred Sed of The Pahua Group specializes in buyer & seller representation of foreclosures/bank owned REOs and tenant representation of Orange County Rental Properties. Fred also specializes in the representation of homeowners in distress by way of Short Selling. For more about Fred visit: http://activerain.com/fredsed and Short Sale FAQs.By Fred Sed
Published on 09/7/2008
Q. My house is really nice, why is the short sale offer so low?
A. Sellers sometimes have an emotional attachment to their home and feel that a short sale offer is too low. It is important to remember that to qualify as a short sale, the seller can never receive any money in the transaction. The only real exception is when the seller has tax liability concerns. Otherwise, the price should not matter to the seller.
A. Sellers sometimes have an emotional attachment to their home and feel that a short sale offer is too low. It is important to remember that to qualify as a short sale, the seller can never receive any money in the transaction. The only real exception is when the seller has tax liability concerns. Otherwise, the price should not matter to the seller.
Q. My house is really nice, why is the short sale offer so low?
A. Sellers sometimes have an emotional attachment to their home and feel that a short sale offer is too low. It is important to remember that to qualify as a short sale, the seller can never receive any money in the transaction. The only real exception is when the seller has tax liability concerns. Otherwise, the price should not matter to the seller.
The most important factor in a short sale is whether the lender will accept the price. Lenders OFTEN accept prices for short sales that normal homeowners or Realtors are surprised at. Discounts of 30% are no longer uncommon. This happens for several reasons:
Be sure to check back next week when I will discuss whether or not to accept an offer from an investor and what to do if your current realtor can’t or won’t do a short sale for you.
A. Sellers sometimes have an emotional attachment to their home and feel that a short sale offer is too low. It is important to remember that to qualify as a short sale, the seller can never receive any money in the transaction. The only real exception is when the seller has tax liability concerns. Otherwise, the price should not matter to the seller.
The most important factor in a short sale is whether the lender will accept the price. Lenders OFTEN accept prices for short sales that normal homeowners or Realtors are surprised at. Discounts of 30% are no longer uncommon. This happens for several reasons:
- Sellers are often in denial about how bad the market really is for housing and therefore how far the value has declined.
- Lenders don't like the foreclosure process any more than homeowners do (especially in Southern California).
- Lenders incur substantial costs during a foreclosure process that can last more than 12 months. They have attorney fees, filing fees, publication fees, lost interest on the money that is tied up, property taxes, insurance, maintenance costs as well as the potential for vandalism of the vacant home. This is all BEFORE having to try to sell the home as a bank owned REO and pay commissions to do that. A short sale is a way to avoid some or all of these costs. If a lender calculates his cost of eviction at $50,000 for a house, they can afford to take a $40,000 loss on a short sale and still be better off.
- Lenders are in an emotionless businesses. They simply look at the numbers and make a decision. If the numbers favor a short sale, they will accept it even if it means taking a large loss. They do not want to wait, they want the deal done NOW.
Be sure to check back next week when I will discuss whether or not to accept an offer from an investor and what to do if your current realtor can’t or won’t do a short sale for you.