For the last few years the term 'short sale' has been bantered around. Just what is a short sale? Did you ever hear a person say 'we are under water?' They are literally drowning in debt with their mortgage in many cases higher than the value of their home.
Many are caught in this situation because of unwise choices made when we had an escalating housing market. Some got into a home with nothing down and an adjustable rate mortgage (ARM). They were banking (no pun intended) upon the continuing escalation of prices to protect them. When the ARM payments started to increase in a few years and the prices started to fall, near panic set in for those caught in this squeeze.
It is estimated that more than 25% of the homeowners owe more than their home is worth. Most of them are able to wait out the market, choosing to stay in their home, make their mortgage payments, and wait for the market to catch up. And it will. It always does.
Others have found themselves on hard times. Some have lost their jobs, had a reduction in pay, or were not wise in credit card debt. For whatever the reason, some have made the decision to walk away from their homes and just let the banks foreclose. In doing so they have hampered their ability to buy another home with mortgage financing for at least three years from the date of foreclosure.
Some have made the decision to try and sell their home, working with the banks to get them to forgive part of the debt. This is called a 'short sale' because the bank is shorting the loan amount or as I like to say 'taking it in the shorts.' A short sale is one of the most complicated ways to sell a home. Some banks take more than six months to make a decision whether to accept an offer to purchase from the buyer.
Many buyers get frustrated with the process and back out of their offer. A lot of frustration and time delays can be alleviated by working with a Realtor who understands the process required for a 'short sale.' This type of sale will work only for those who find themselves in extreme financial hardship. If this is the case, you must get expert help. This is not for the novice.
'If you want others to be happy, practice compassion. If you want to be happy, practice compassion.' The Dalai Lama. Until next week keep smiling.