Are you "under water" or thinking of a "short sale"?

A short sale is when a property is sold "short" or sold for less than what is owed on the mortgage. The most common use of the term refers to a bank short sale, where the bank agrees to reduce the loan payoff amount. In this case, the bank accepts less than what is owed, and at the same time, the seller is not allowed to make any profit on the sale. Many who have purchased or refinanced and have taken money out of the property may find themselves owing more on the loan than what the property is worth today.

Qualifying for a short sale may be tedious, while each lender has its own guidelines. Cases are evaluated on an individual basis. General requests to the owner include a "hardship letter" to be written by the property owner, several months of bank account statements, 2 years of tax returns, and a financial statement. Most lenders won't even consider a short sale unless there is an actual offer on the table. Some good explanations for hardship include a lack of ability to make the payments due to loss of income or other financial hardship or forced reason for a sale. The bank will consider granting the short sale if the offer on the table is at or close to market value and if they would rather unload the property then deal with a foreclosure down the line. They are considered especially if the property is already in default.

Today in Miami-Dade County, there are 9,248 single family homes listed for sale in the MLS, with 3,371 (or 1/3 of the properties) being offered as "short sales". Only 502 of the single family home listings are actually listed as bank owned foreclosures. The short sale process is very slow, often taking 3 months minimum to hear a response from the bank after an offer is submitted. But the silver lining is that we are starting to see more short sales actually close, so the wait is becoming worthwhile if one really wants a certain property. If you are considering selling or buying a short sale, it is wise to have an agent (like myself) who is experienced in this arena. Stay tuned for more on this subject at a later date.