The term ‘Short Sale’ is a term that no one likes to speak aloud. (Sort of like Lord Voldemort in the Harry Potter series) It causes us to visibly wince, and feel very anxious, and it’s not to be discussed in polite company. Many folks aren’t too sure. Is it really that bad? What IS a short sale anyway?
Here’s a scenario: A home was purchased at the height of the real estate boom, say, for 500K. Thanks to the huge economic downturn and the mortgage/banking crisis, home values took a dive, and jobs were lost. So now today, this same house is worth only 300K. The bad part is, the mortgage payment is still on the original 500K. And you just got pink slipped at the job today. So making the house payment isn’t going to be possible anymore. What is the answer when you owe more on the house than it is worth or can be sold for? (Also known as “being underwater” or “upside down” in a mortgage.) Consider a short sale. It is not as dark and murky as previously thought.
To qualify for selling your home as a short sale, you must owe more than the home is worth today, and also have financial hardship and be unable to continue with the mortgage payments. You and your realtor can put your home on the market as a “short sale”. This means that your mortgage company/lender or bank will decide if it will accept an offer from a buyer for the amount that the house is valued at today. (300K vs the original 500K it was originally purchased for, or short of the full amount owed)
It is important to choose a realtor with short sale experience, like Mona. The short sale process can be a bit tedious, so bring your patience! The mortgage company/lender will ask for various documentation that shows your inability to keep making the mortgage payments going forward. (things like bank statements, tax returns, pay stubs, doctor bills etc. ) Often the approval process can take up to about 3 months. (They call that a short sale??) Once the lender decides to accept the lower amount, typically they will also release you from the difference.
The California real estate market was hit very hard in this economic and real estate market debacle. San Ramon was no exception. An example of this is that in the past year, 349 homes sold as regular sales, and 286 homes sold as short sales, right here in San Ramon! That is a large chunk of the real estate activity in our fair city. Thankfully we are showing a steady recovery. Thanks to the high demand, and low inventory, our prices are creeping up. These days, many banks are more amenable to short sales, and are often able to process them more quickly than before. Short sales are more common and less scary than they used to be, and can actually be discussed around the water cooler! Take that, Lord Voldemort!