Short Sale is a sale that does not produce sufficient funds to cover the existing monetary encumbrance against the property, closing costs, real estate commissions and other financial requirements of closing (seller costs).
- Buyer and Seller must sign a contract of sale to be submitted to the lender to consider doing a short sale.
- The Buyer must also submit a pre approval letter or proof of funds to show they have the ability to purchase the property.
- After the lender receives the short sale packet, the lender will require at least 90 to 120 days to approve the short sale if the price is “subject to short sale approval”. After approval, the sale must close within typically 30 days.
- If the price is already “approved” by the lender the short sale will typically close with in 30 days from the signing of contract.
- The seller will not receive any funds in the transaction. Any funds usually due to the seller will be paid to the lender.
- The seller has no additional cash and will be unable to pay for any closing cost.
- The lender always pays the realtor(s) commission that the lender can negotiate at a lower fee if they so choose. The buyer is not responsible for the realtor(s) commission unless they have a buyer’s agency agreement with the realtor that details that agreement.
- At times the seller is unable to pay for maintaining the property. If the buyer would like turn on utilities for any inspections, the buyer must pay for those utilities costs.
- Short sale properties are always sold in “AS IS” condition. The seller nor the lender will agree to fix anything wrong with the property but the buyer is still entitled to pay for a home inspection at their expense.
- Typically the lender will pay to have an appraisal or BPO done to determine value and has the right to counter offer the buyer at a price they feel is fair for the property on the premise of a short sale.
- The buyer has the right to decline this offer and still get their earnest deposit back in full without interest.
- The buyer does also have the right to cancel the contract at any point in the review period of the short sale process and get their earnest deposit back.
- The buyer needs to understand the banks are to busy to give progress reports and during the short sale review will only communicate with the negotiator what is need to determine if they accept or decline the offer.
It is standard for the property to still be marketed for sale until the lender agrees to accept the contract of sale between the buyer and the seller.