Sounds easy to sell a home via a short sale? Think again.
When a bank approves a short sale, they want to be assured that the seller is not able to pay the debt owed and forgiving the outstanding debt will be a better business decision than foreclosing on the property. The bank will do whatever makes more economic sense to them.
The seller of a short sale will walk away with bad credit instead of the really bad credit associated with a foreclosure. Typically the seller can also get the deficiency waived by the bank but this is not always the case with a short sale. A seller may need to file for bankruptcy after a short sale or foreclosure in order to get the deficiency judgment waived. In rare cases, a bank may give the seller a little bit of money to move. So while there are upsides to a short sale, none of them are guaranteed. And in the meantime, a seller is required to provide the following documentation:
- A financial worksheet completed by the seller
- Recent bank statements
- Recent tax returns
- Current pay stubs
- Equity/brokerage account statements
- A hardship letter laying out the seller’s reason for the short sale
The banks require a lot of paperwork in order to process a short sale. If they don’t have absolutely everything they need, they won’t work on the file. This means that if you’re missing one document or one bank statement has the wrong date, there will be a hold up. And as time passes (which is typically the case with short sales), a seller has to keep submitting and resubmitting updated pay stubs, bank statements, etc.
On top of that, any seller who wants to get the most money for their house, the house needs to be in good showing condition and available for showings at any time (i.e. days, nights, weekends). A short sale seller is wise to have the home show well because that is more likely to result in an offer that will be acceptable to the bank. However, any seller will tell you that keeping a home “showing ready” is no easy task.
Lastly, there is an emotional side to selling via a short sale. The seller usually needs to demonstrate financial distress/hardship (i.e. loss of job, illness, divorce, etc). These hardships are real and tend to spill over into other areas of their lives not just the sale of their home.
Selling via a short sale is a demanding and stressful process for a seller. There are many unknowns coupled with continuous demands for information/documentation and a prolonged selling period versus in a non-distressed sale. There is often a temptation for to “give up” and walk away. Everyone – seller, buyers, and their agents – need a lot of patience and dedication to making a short sale successful.
The Scott Loper Team includes Scott & Lisa Loper, Keller Williams Real Estate, 601 Bethlehem Pike, Bldg. B, Ste. 100, Montgomeryville, PA 18936, (215) 631-1900, www.ScottLoperTeam.com.