What is short selling of real estate?

Although my experience comes from my collaboration with a large number of homeowners facing foreclosure in the Sarasota, Bradenton, Lakewood Ranch and Venice regions, “a short sale is a short sale” on the Florida Gulf Coast matter where you live.

The term “short-term properties” is increasingly used. Read the newspaper or turn on the television and there is a good chance for you to find information for the deterioration of real estate market conditions and the growing willingness of banks and other financial institutions to consider short selling as an alternative to blocking .

In all regions of the country, property prices are falling and the time needed to sell the properties has increased significantly. It is no exaggeration to say that some regions are experiencing a virtual market crash (the Detroit market is a good example). The fall in real estate markets is the main reason for the increase in real estate opportunities for short selling.

So what is a short sale? This is when a bank agrees to allow a property to be sold at a price lower than the amount it is due. Before a bank can be approved, two conditions must be met:

The market value is such that the sale price of the property cannot cover the loan balance (s).
Homeowners find themselves unable to continue making mortgage payments on the property.
For example, suppose a property was purchased five years ago for $ 217,000 with a variable rate mortgage. Suppose two years after buying the property, the owners took a second mortgage of $ 10,000, which means that today, the owners owe $ 227,000 on the property (note that in five years, the loan amount would be negligible).

Suppose further that the property is located in a part of the country where the market value has fallen to $ 160,000 for comparable properties and the initial “mortgage spread” rate has recently been adjusted upwards of 3%. Finally, add to the fact that one of the owners just lost their job and creating a property sales situation is obvious.

Rather than going through the expense and delay required by a foreclosure proceeding, the bank may decide that allowing a short sale is more long-term approach – it is better to have a known amount of money and time ownership of the bank books than a quantity unknown money at a point far in the future. Of course, the process can lead to many complications, such as when different owners and / or lenders cannot accept the terms of a sale, but in a shell that constitutes most of a short sale of real estate. .

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