What is a Short Sale?

A few weeks ago, I closed on the sale of a property that we had listed, and we closed it as a short sale.

And what is a short sale, you might be asking? Well, I’ll explain it to you.

It was my very first short sale, but I’m not new to the theory of it because, remember, I used to be a lender. I know what it’s like to foreclose on individuals with mortgages and also negotiate transactions involving distressed loans.

A short sale basically means that you’re selling your house for less than you owe.

Here’s an example. Let’s say the principal balance on your loan is $200,000, and you have your house on the market for $210,000. It sits on the market for a while, and you can’t even sell it for $210,000. So, you have to sell it for less than what you owe.

Let’s say somebody comes in and offers you $195,000, and you’re thinking, “Well, I owe $200,000. How can I sell it for $195,000?”

Your lender has to agree to basically take a $5,000 loss. Does that make sense?

So, your lender has to agree to a short sale.

It is a very complicated process. Do not rely on just any real estate agent to be able to handle this for you. You need to have somebody who is very knowledgeable about lending and knows how to handle a short sale. I think you can even get a certification in it.

In this instance, my client had an FHA loan, so not only did I work with the lender, I also worked with Fannie Mae. So, there was a whole bunch involved in closing that transaction.

I’m telling you right now, in this process, you need to make sure your agent is knowledgeable about short sales. Because if you don’t know what’s going on and you’re not coordinating all of these people together, you could lose track of the timeline, and the house could, especially if it’s distressed, go into foreclosure before you’re even able to close on the transaction.

The moral of this story is: if your house has been on the market for a while, and the asking price that you have is just a little bit above what you owe, and you’re thinking, “I can’t even get an offer for that,” or maybe somebody is offering you less than what you owe—don’t get distressed.

Call your lender.

The last thing that a lender wants to do is foreclose on your property. They will work with you. So, talk to them about your options and say, “Hey, would you consider a short sale?”

You don’t get to just do this because you chose to. Your lender has to agree because they’re the ones who have to decide, “Yeah, you know, it’s better for us to write off that $5,000 loss than to go into foreclosure, go through that process, pay these closing costs, and potentially end up selling it for less, too.”

Don’t just walk away and let your home go into foreclosure because that will go on your credit report and can hurt you for years and years down the road.

A short sale may be an alternative.

It was time-consuming. It was a lot. It took a while, but it wasn’t rocket science.

I’m Corey Radley. I’ve been a licensed broker in Texas, and I’m based out of the El Campo area.

Let me know if you need anything!