What exactly is a “Short Sale”?

Redding, CA Short SaleI just wanted to take a moment to discuss a SHORT SALE as many people that we encounter in the Redding area have no clue what it actually means. 

A “short sale” is when someone who owns a home (financed by a bank) is allowed to sell the home for less than the current amount owed on the property.  The bank needs to approve the amount of payoff that is “short” of the amount that is owed to them and this is where the name “short sale” comes from. 

The misconception is that ANYONE can do a short sale just because the home is worth less than they paid for it.  This is very untrue and Realtors should be discussing this with potential homeowners looking to do a short sale on their home.  Banks now are reviewing possible short sale homes to determine if the seller actually qualifies to sell the home short. 

So how can a home and the seller “qualify” for a short sale?  Each bank varies.  This being said, the general rule is that the seller needs to show a “hardship” through a letter in which they disclose their situation that has led them to HAVE to sell the home now instead of waiting out the market.  Some hardships include loss of job or medical problems and the seller should present actual proof of the hardship with the Short Sale package.   In addition to a hardship, some banks are reviewing the original loan package from when the buyer purchased the home to ensure they didn’t exaggerate their income/decrease expenses when they originally purchased (which is actually lender fraud and some areas considered “grand theft”).  You should also be prepared to provide past tax documents and statements of current income/expenses to support your need to sell now. 

For more information on Short Sales contact Clint & Mindy Cronic, The Cronic Group of Real Estate Professionals GMAC at 530.227.0345 or via email at contactus@sellingredding.com.

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Short Sale Versus REO? What does it all mean?

Well we have been working with many clients lately that have been interested in Short Sales or REO’s.  I’d like to explain the difference as most people coming to us don’t really understand exactly what each is.

A short sale is a property that is being sold “SHORT” of the amount owed on it.  This means that if you submit an offer on a home that is a short sale the seller (owner) would approve the offer and then send it to the bank that they have their loan through for final approval.  The bank has the ultimate authority for approval and if they don’t approve the offer amount and counter offers are not successful then if no other offers are successful the home would be sold back to the bank after the Notice of Default for non-payment is made and a sale date is created at the courthouse steps.  Remember, if you are writing an offer on a short sale the approval time can be VERY lengthy.  By this I mean that we have had some short sales that were not approved for 4 months.  What we generally would do is submit the offer and continue to look at all new listings that come onto the market in case something better comes along for our clients. 

An REO (bank owned, foreclosure) is “Real estate owned” by the bank.  This means a notice of default was filed when the owner stopped making payments.  After a specified time a sale date was created and the home was sold back to the bank at the courthouse steps.  The bank then has complete possession of the property and vacates the previous owner (if needed) and turns the listing over to a real estate agent to list.  Banks generally have a fairly quick response time (1 day to 8 days usually in our area) and are usually listing their homes near or at fair market value.  We’ve found that new listings aren’t usually too open for negotiation but around the 30 day mark the banks usually negotiate more (but there are ALWAYS exceptions to this). 

So, if you are thinking of purchasing a short sale or REO home we’d love the opportunity to assist you!  Just call us at 530.227.0345 or visit our website at www.sellingredding.com

You can always search the entire MLS at www.sellingredding.com/selectmlstosearch.htm

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