Tag Archives: short sale

Notes on the Ins and Outs of Highlands Short Sale Listings

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Any dedicated bargain hunter who scours the Highlands listings is not surprised to find among the most deeply discounted entries one of two notations: foreclosure or short sale.

Everyone knows what the “foreclosure” designation means—it’s been repossessed by the bank. It’s an REO (real estate owned). By discounting the asking price, the lending entity invites buyers to take the property off its books. It is here that the economists’ favorite acronym, “TANSTAAFL” (There Ain’t No Such Thing As A Free Lunch), comes into play. Foreclosed properties have frequently been neglected by their previous owners, who are not happy campers. So the cost of rehabilitation must be factored in before any offer is made. Still, foreclosures can represent real opportunities for buyers with patience and determination.

Slightly different are foreclosures’ first cousins: Highlands’s short sale listings. There are any number of unforeseen circumstances that can cause an owner to fall into financial distress, but when their home has to be repossessed, the impact on the borrower’s credit is immediate and drastic. It can make finding a new place to live difficult, and can even make future employers hesitate to hire someone whose record includes that kind of hefty unpaid debt.

Highlands properties which fall in the “short sale” category are those in which the borrower has been unable to keep up with the mortgage payments, but who is arranging for the lender to agree to accept a payoff that’s less than the full amount owed. When a short sale is finalized, the result is still some damage to the original borrower’s credit, but less than had a foreclosure proceeded. The buyer will benefit from what should be a substantially lower price than a comparable Highlands property would bring—and a home that is usually in better condition. An eager lender can also sometimes offer favorable financing terms, too.

But remembering what the economists say about TANSTAAFL, there are also these points to keep in mind:

Short sales involve extra bureaucratic red tape. The fine print includes items such as the lender having to approve details of the sale—and that can result in nerve-racking delays.
Although the owner is usually trying to keep a short sale property in good shape to facilitate the deal, banks won’t allow a short sale until the borrower has seriously fallen behind in payments. That can mean an inability to keep up with the expense of proper maintenance. As in a foreclosure, canny short sale buyers make certain they know the cost of rehabilitation.
The possibility of sticky legal issues needs to be recognized. For instance, if the seller has filed for bankruptcy, it could squelch the whole deal. Negotiating a short sale can be considered a “collection activity”—and those aren’t allowed in most bankruptcy courts.

If one of Highlands’s foreclosure or short sale-denoted listings has grabbed your attention, I can help. It will require attending to some technical issues attached to the specific property—but I’ll be pleased to help you navigate the process from beginning to end!

Why a Highlands ‘Short Sale’ Can Take a Long Time

1-14-shortsaleThe term “short sale” has been misleading people for decades. Despite the name, it’s a term applied to transactions that often involve a lengthier-than-usual sale process. A Highlands “short sale” is named for the financial aspect of a sale rather than the length of time it requires. It’s anything but a shortcut.

The ‘short’ in ‘short sale’ describes a sale at a price that comes up short—is less than the full amount owed on a Highlands home loan. As you’d guess, whether a bank (or any mortgage holder) accepts such a sale is a decision that is up to the lender.

Why would a bank choose to move ahead with a short sale instead of holding out for the full amount? After all, if a borrower is unable to pay, it’s hardly the bank’s fault. You might think that it is always in the bank’s interest to hold out for full repayment, and to take possession of a mortgaged property whenever that doesn’t happen…but in reality, that’s often not true. In the real world, the bank will lose money on either a short sale or a foreclosure—but the latter is often more expensive, since it requires the bank to do the expensive work of repossessing and selling the property.

To a distressed homeowner, a short sale is an opportunity to close accounts on better terms. Instead of weathering a foreclosure, which would result in a major strike against his or her credit record, if the bank will agree, it becomes a joint resolution between the debtor and bank—and that doesn’t just sound more amicable. But getting the lender’s approval is where the delay issue usually crops up. The steps needed before the mortgagee and the bank agree to sell the home at the lower price vary. They can involve submitting a buyer’s discounted offer, or the borrower convincing the bank that a short sale is warranted—usually after following procedures spelled by the bank. The bank can (and usually will) reject a short sale proposal or offer if it feels more money can be gained by foreclosing. And it can take a while…

It may sound like a happy solution for homeowners with financial problems, but among other drawbacks (for instance, there can be tax issues), the “a while” it takes to close a Highlands short sale can be between five and seven months! Yet for patient (or even better, very patient) buyers and sellers, a successful Highlands short sale can yield the best of a bad situation and an unmatched bargain.

There are endless variations for how any given short sale can proceed, so having an experienced Realtor® in your corner is always a good idea…and calling me is the way to start!