real estate short sale?

The term "Short Sale" means to sell the bank short of what they are owed. As an example take a $100k house with payments of say $700.00 per month. Once this house goes into foreclosure the process can take 12 to 18 months just to get the house back in the banks name. The bank has to hire an attorney etc... to file the foreclosure so lets look at the numbers to understand the short sale process:

Original Balance: $100,000.00

While in foreclosure the bank doesn't collect payments so 18 Months Payments lost 18 x 750.00 = $13500.00

The cost of an attorney easily will cost $20,000

Lost interest, fees etc....$2500.00

I haven't included all of the banks cost here but we are already up to about $136,000.00. Add to the fact that this process can take over a year and the bank still wont have their money all they will have is a vacant property that can still take a long time to sell if it isn't in perfect condition. And this problem is really exacerbated if the value has gone backwards which could put them $50k or more in the hole Once you understand this then you begin to understand the short sale process.

Now back to our $100k example. The bank knows they are about to lose $50k in fees, lost opportunity costs etc.... so they put the property up for short sale. The bank realistically in this situation will probably take any offer over $80k as it would actually be saving them money even though on paper they are losing $20k plus. To have the $80k now is a blessing rather than take a $50k hit later. This is the very essence of short sales and in today's market banks are willing to do this.

The reason you need a bank to approve is they have to run the numbers like i just did. They will take the offer they have an calculate current losses with your offer and then estimate losses if they hold onto the property and look at which one nets them more. If the short sale offer nets them more now than they will get in the long run you will likely be accepted.

Once the bank accepts your short sale it is now on you to close. They don"t care about your down payment or anything of the sort all they care about is you cashing them out. You will still need to have either all cash or a loan all setup before they will even start the short sale process with you as this process costs them money as well and they only want to entertain offers with those that are qualified.

Short sale is when you are selling the property below what the balance on your loan. The bank will need to approve it because they need to make sure you have a legitimate reason for selling your property short. Down payment? Yes, just like when you buy regular or bank owned property, down payment is required depending on what loan program you are applying.

When the homeowner sells the house for an amount lower than what is owed on the home. The owner's lender has agreed to accept a current value settlement even though it is less than full maturity. The owner and the lender need to know that the buyer serious as the property is distressed and timing is crucial. I would think you need to put a down payment if you are financing and as earnest money to the owner.

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