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Short Sale

Short Sale

The best way to sell a property that is more than 20-30% under water, without having to pay off the shortage, is to negotiate a short sale. This is also one of the most common ways to sell a property in which the owner is already many months behind in payments, has little or no equity, and wishes to avoid a foreclosure.

A Short Sale involves an investor or buyer and a Realtor, working with the property owner to negotiate with the property owner’s lender. The goal of the negotiations is to postpone (and prevent) a foreclosure auction and negotiate a discounted payoff on the loan (or loans). Using this method, the property can be purchased at a reduced price (less than what’s owed) and a foreclosure can be avoided.
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Short Sale Example

  • Current Property Value: $185,000
  • Existing loan(s) payoff: $210,000
  • Sales price needed to break even: $231,000 (assumes ~10% closing costs and commissions, etc.)

This property would have to be sold for approximately $231,000 to cover all loans, taxes, closing costs, commissions, etc. Unfortunately, the property is only worth $185,000 in the current market, so the property owner would have to come up with $46,000 to cover the difference.

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Now, let’s look at a Short Sale Scenario…
Property Value: $185,000
Negotiated loan(s) payoff: $165,000
Sales price needed to break even: $181,500

In this scenario, after the loan is negotiated, the property can be sold for anywhere from $181,500 to $185,000 with no foreclosure and no additional cost to the property owner.

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We’d love to hear more about your situation and how we can help. Email us directly at markgerson@webuycarolinahouses.com, and let’s discuss how we can find the best solution for you.
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Fast Cash Sale Advantages and Disadvantages

Advantages

  • May be the only way to sell a property when the loan(s) exceed the property’s value and the owner cannot make up the difference.
  • Can postpone foreclosure.
  • If successful, can avoid foreclosure.

Disadvantages

  • Affects credit.
  • Worse than foreclosure for credit.
  • 50% are denied or fail to meet buyer's price.
  • May still end in foreclosure.
  • Potential for a deficiency judgment (rare).
  • Can impact security clearance (for some government employees).
  • May result in a 1099 for phantom income (tax implications, though limited by the Debt Forgiveness Act of 2007).

Short sales are highly complex negotiations that take significant time, paperwork, and expertise. They are among the most complex transactions in real estate. In addition, it typically takes many many months to negotiate with the seller’s lender.

We Buy Carolina Houses is part of a network that has performed over 1,000 short sales for sellers needing this service. If you would like to discuss a short sale, and all of your other options for avoiding foreclosure, We Buy Carolina Houses can help! Contact Us if you would like to explore this further.

Common Questions About Short Sales

Can I do a short sale myself?

No. A lender will need a purchase offer before they will even consider negotiating a short sale. The offer must be real and be accompanied by a “Proof of Funds” letter from the investor and/or buyer. Additionally, the lender will want a great deal of documentation from the property owner. Our network of investors and Realtors has a great deal of experience and expertise in this area. If you would like our help: Contact Us

Yes. Everything you do affects your credit to different degrees. In order for a lender to consider approving a short sale on a loan, the loan will generally have to be non-performing. In other words, the property owner must be behind in payments – thus credit damage is already occurring. Once the short sale is approved, the lender will “charge off” a portion of the loan, which also affects the property owner’s credit. The benefit is that the property can be sold and that a foreclosure and its legal ramifications can be avoided. Most experts acknowledge that a foreclosure is the worst thing that can happen to your credit.

Not usually. The bank will pay for all of the closings costs, commission, taxes and fees on behalf of the property owner (out of the proceeds) to facilitate the transaction. Beware of companies that charge fees for foreclosure avoidance, loan modifications, and credit repair – many of these services are not reputable, and possibly not legal.

We Buy Carolina Houses and our affiliate, Love American Homes, have helped over 1,000 people to navigate through the process of doing a short sale. We can help – Contact Us