Short sale is an unfamiliar term for many homeowners and buyers in the DC area that is used frequently in the real estate industry. Pillar Property Group would like to take the time to explain the term to both the troubled homeowner and the potential buyer.
First, we need to explain why a short sale is a viable prevention measure to avoid foreclosure for the homeowner. First, the costs associated with short sales are less costly for lenders than going through the full foreclosure process, and they can possibly help the troubled homeowner preserve their credit.
“Short sales are becoming a larger portion of home sales in the U.S., including DC,” said Eric Skeeter, Pillar Property Group.
The goal of the short sale is to prevent the troubled homeowner’s property from entering in voluntary foreclosure process. This will prevent mortgages from entering real estate owned status (REO).
So, what is a short sale? What does it mean for the troubled homeowner and the potential buyer? First, let’s address the latter question. For the homeowner, a short sale involves telling the lender your financial situation and requests them to accept less than you owe. Our advice is to be upfront with the lender of your current financial status.
What does this process involve for the homeowner?
1. You must contact the loan servicing center of your mortgage provider. Loan servicing centers are not banks. They are collectors of your payment on behalf of your mortgage provider.
2. Troubled homeowner’s these loan servicing centers will want documentation of your current financial situation. This will involve submitting a financial statement to the lender. A financial statement is the total of all your bills not excluding what you pay in groceries and gas.
3. Placing the home on the market, finding a buyer, and the offer that is needed.
4. Dot every ‘I’ and cross every “T” in the paperwork involved because there is a good deal of it.
5. Keep the property maintained and track of your bids from potential buyers. The higher the bid means you could possibly end up owing nothing on the property and help get your short sale approved from the bank that much quicker.
6. Finally, you wait for the approval process from the interested buyer or investor and the lender.
“The homeowners of these short sales properties should keep them well maintained to make properties attractive to potential investors or first-time homebuyers,”
What do short sale properties mean to potential investors or first-time home buyers?
1. Traditional lending institutions (banks) are taking an average 4 to 6 months before approving these properties. This means a buyer must put in an offer relatively early to start this process before even being considered by banks.
2. Make multiple offers for short sale properties that you are interested in purchasing and just wait. The more offers you have means you are increasing your chance of shortening the bank’s turnaround time of 4 to 6 months
3. These properties are highly maintained due to the owner’s incentive of getting the short sale approved. For the investor and first-time buyer, you are getting prime property with little to reinvest back into the property.
4. Seek a professional in guiding you through the short sale process because they know where these properties are located as well as the deals you are looking for.
For more information or assistance with short sale properties, please contact Pillar Property Group.