What exactly is a short sale? This is a question asked often in these difficult times. Let me share the definition according to the Northwest Multiple Listing:
"A 'Short Sale' is a sale that does not produce sufficient funds to cover the existing monetary encumbrances against the Property, closing costs, real estate commissions, and other financial requirements of closing. Seller’s creditor(s) are those third parties who have an interest in the Property in the form of a deed of trust, some other security, or a lien (e.g. tax lien). In a short sale, Seller will usually need to get the consent of Seller’s creditor(s) in order for the sale to close. This is because Seller’s creditor(s) may have to agree to accept less than the outstanding amount of Seller’s debt that is owed to the creditor(s)."
As a professional that is both representing buyers and helping sellers, dealing with short sales seems to be the norm these days. I would estimate up to 60% of transactions are dealing with some kind of "short sale".
What are the pro's and con's to short sales?
Pro's- as a seller you are in control of the sale of your home, unlike a foreclosure where the bank or lien holder is in the driver's seat. Keep this in mind though - if you are not priced aggressively enough to get an offer on your home, there won't be a short sale!
Pro's- Typically a short sale is less of a "ding" on your credit score.
Pro's- Often times the seller will be able to get the lien holder to "forgive" the deficiency. Keep in mind, however, that you will be taxed on this "forgiven" amount, so make sure you consult your tax advisor regarding this.
Pro's- As a buyer, there's lots of opportunity for deals with short sales, if you have patience to wait!
Con's- As a seller there is no guarantee of a sale, even if you have an offer. The banks or lien holder(s) have the final say.
Con's- As a seller, you will typically need to be in arrears on your payments for the lien holder(s) to consider a short sale.
Con's- As a buyer will need to be willing to be patient, and there's no guarantee of a sale.
These are just some of the pro's and con's of short sales. For more specific information regarding your personal situation, feel free to give me a call. Not only am I a Real Estate Broker but I am also a Certified Financial Counselor with a great deal of experience in dealing with short sales.
Give me a call or email, I would like the opportunity to help you in this difficult time.
There is hope, there is a way out!
