First, I’ll try to explain what a short sale is. A short sale happens when the net proceeds from the sale of a property are not enough to cover a seller’s mortgage and closing costs (such as real estate commissions, property and misc. taxes, etc.). Plus the seller is unable or unwilling to cover the difference. In many cases, the lender agrees to accept less than the total amount due and will release or satisfy the mortgage and the note. The words Preforeclosure or Pre-Foreclosure sales are sometimes used in place of a short sale.  

The cause for a short sale can be due to a variety of reasons. Property owners (Mortgagors) may be in default on their mortgage due to employment issues, divorce, medical challenges, death, unexpected debt and other hardships. Some may have bought at the top of the real estate market and now find themselves “upside down” on their mortgage. Others may have drained equity out of their property through refinancing. In any case, they find themselves unable to make their payments and faced potential foreclosure. 

One of the key requirements in buying a short sale is having patience. Many potential home buyers find that short sale listings take forever and never close. Many Real Estate Agents, experienced in listing or assisting in the buying of short sales, question whether it’s really worth the time. That may change.

Recently, there was a great article in the January 31, 2010, AJC homefinder section of The Atlanta Journal-Constitution (AJC) by John Adams, “Big News on Short Sales”. John talks about a new rule that is going into effect in April that will force many of the big lenders to respond to short sales within 10 business days of getting an offer. This new rule will solve one of the biggest challenges that face buyers wanting to buy a short sale. Today, many buyers wait weeks and months to hear back whether a loan servicer (lender) has accepted or countered their offer. It also affects the property owner which in many cases face foreclosure before the deal is accepted.

Shown below is a great video talking about Short Sales and explaining the new rules going into effect in April, 2010.

   WILL FEDERAL GUIDELINES SPEED SHORT SALES?

                                   Realtor TV

So, expect to see big changes in the amount of interest in buying short sales this year. At a recent seminar by the Law Firm of O’Kelley & Sorohan, Joe O’Kelley Jr stated that we can expect the distressed property challenge to continue for at least another two years. Currently, close to 50% of homes sold are distressed. That’s bad news for many home owners, but great news for home buyers and investors.

 

By Jay Hufnagel, Keller Williams Realty, sayjay@bellsouth.net , 770-757-2799, www.SayJayLakeandHome.com