Short Sales

What is a short sale? A short sale is when the seller of a property arranges with the bank holding the mortgage to agree to take less than the home is mortgaged for in order to complete a sale. This is happening now because buyers purchased homes that have now lost approximately 20% of their value since the height of the market approximately a year and a half to two years ago.

So let's say that a couple bought a home for $660,000 and it is now worth about $560,000. They are being relocated to Atlanta. They put 10% down at the time of purchase. They would need to take a loss of about $35,000 and then the price of the realty commission, transfer tax which is about 1% of the purchase price, and the attorney fee. So they are now looking at an additonal loss of $22,400 at a reduced realtor fee of 4%, $5600 transfer tax and about $1400 for the attorney fee. Therefore, they could be looking at having to bring to the closing table about $63,400 just in order to get rid of the property and move on.

That's a lot of money.

Short sales do affect one's credit but they are a possibility to avoid foreclosure, which is much worse for one's credit rating. If you have to move and renting your property is not going to be pheasible for you, then it may be your only option if you don't have the funds to close on a property that has lost significant value since purchased. It is cumbersome because banks do not want to do it, but it could save both you and the bank substantial money in the long run.

I will be taking a course in short sales this October. Most realtors in Hoboken are not well-versed in this problem but I believe we will see more of these before our market fully recovers. It is an excellent opportunity for buyers but it requires great patience and perseverance on the parts of the sellers, buyers, and realtors.