Cape Cod Short Sale Information
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There is a misconception that a short sale property is bank owned or distressed. This is not always the case. There can be many reasons a homeowner needs to or decides to sell a property. A property involved in a short sale is one that the owner of the property has a mortgage that is greater then the market price.
For example: Mr. and Mrs. Jones bought a home on Cape Cod for 350k and have a mortgage of $300,000. They decide to sell, but the house in the current market is only worth $250,000. Their mortgage is $50,000 more than what the market will bear.
What does this mean for Sellers…
Step One: Get a comprehensive market analysis from an experienced, trustworthy real estate team. Once an accurate price is established and that price is determined to be below the mortgage owed, the owners must decide on a course of action.
Several of the options to consider are: negotiate a loan modification with the bank, begin the short sale process or try to stay current with your current mortgage with the risk that if you can not the bank may begin the foreclosure process. With the 2009 Stimulus Plan legislation loan modification is a very plausible option.
Step Two: If selling is the only option, it’s time to have a sit down with your agent team and discuss the necessary steps. Make sure your agent is familiar with the short sale process. Hiring an attorney is always recommended and there are also short sale specialists who are not real estate agents, but work with the homeowner, agent and attorney to facilitate the sale with the bank. The bank might also order its own BPO, Broker Price Opinion, to get an independent assessment of the property value.
Step Three: Once the bank agrees to a short sale it is time to get the property on the market. Some buyers are hesitant to become involved with a property that is a short sale because banks can hold up the offer process for weeks and sometimes months. That is why it is important to be prepared, organized and efficient. Your agent (or short sale negotiator) should be in direct contact with the bank or the banks attorney at all times. Maximize exposure, create an environment that is conducive to receiving offers and make sure buyers know this house is a short sale and not bank owned. Foreclosures have a reputation of needing repairs whereas short sale properties often still have owner occupants. It is important to maintain the property and prepare it for showings per your agent’s recommendations. First impressions are half the battle with buyers.
Step Four: When an offer comes in it will need to be approved by the bank which could take time. The buyer should be prepared to be patient. We have seen decisions from the bank come in days, weeks or months.
Sometimes offers are negotiated prior to being submitted; sometimes they go right to the bank as an offer or as a Purchase and Sales. When the bank makes their decisions, they often want to move quickly. Everything will be based on a tight timeline. Inspections, septic repairs, etc will all have to be scheduled and completed before closing.
Step Five: Closing….as long as all the paperwork is in order, all inspections have been satisfied and the septic has either been passed, repaired or installed (or arrangements have been made for it with the buyer) the closing should go smoothly and much the same way a typical transaction should.
Part of the previous negotiation with the bank will be to determine what happens to the remainder owed after sale price. How this is handled is different depending on the bank and the amount owed. This is where the attorney is important. Hopefully they can negotiate a full or partial forgiveness of the deficiency.
Remember…your credit report will be affected by a short sale, but less than if the house goes to foreclosure.
Foreclosure and keys for cash (also called deed in lieu of foreclosure) are other options to consider if the homeowner cannot keep up with mortgage payments.