A short sale, the sale of a property in which the amount owed exceeds it’s current value is common place in the real estate market ever since home values began declining in the late 2000s.
Short sales are performed by thousands of sellers everyday as they attempt to avoid foreclosure and get out from under an unbearable mortgage which has lost as much as 45% of it’s value here in California.
The key to short sales is a financial hardship in which the seller makes the case to his motgage holder that this is the best option for all parties in order to avoid foreclosure. The Short Sale process has helped many struggling homeowners move on with their lives while limiting the consequences the loss of a home would bare.
The Challenges
There are a multitude of issues which can arise during the course of a short sale.
These may include:
- Back Due Homeowner Association Fees
- Multiple Loans (All Require Approvals)
- Time Line (Some Short Sales may take 4+ Months fro approvals)
- Counter Offer (You may wait several months only to find out your offer is not sufficient)
- Termite Repairs (Most Lenders will not pay for any repairs)
- Property Taxes and Miscellanious Fees (Some Lenders will not pay for certain fees)
Yet out of all the uncertainty a short sale brings to the transaction, what I beleive can be the most detrimental is the Renter. An investment property which is currently rented and is being offered for sale as a Short Sale.
Why? In a short sale in which the owner resides in the property, all parties have an interest in succesfully closing the sale. The Seller of course which is trying to avoid foreclosure, the Short Sale Lender who is attempting to recoup as much money as possible under the circumstances, and the Buyer who obviously wants the property for him or her self. All have a common goal to follow all the timeframes and conditions necessary in order to close the deal. Now throw a Renter in the mix… What is the renter’s motivation? None! If anything, the renter would rather prolong the ordeal as to not have to go through the hassle of finding another place to move to. They could also stop paying rent due to the circumstances or worse, trash the property itself during the course of the transaction, almost crushing any hopes of completing the short sale.
The bottom line, this scenario doesn’t always happen and there are great cooperative renters out there, but it can and has happened. When I show clients short sales which currently have tenants I always caution them about what could happen. With timelines and Deposits at risk it’s much better to be safe than sorry.
Share Your Story
Have you had an experience in which a renter delayed or caused your short sale to fail?
About Daniel Di Matteo
THE REAL ESTATE BUSINESS HAS LESS TO DO ABOUT SELLING PROPERTIES AND EVERYTHING TO DO ABOUT HELPING PEOPLE.
