Often in todays economy, Realtors hear the refrain from Sellers:  "But I owe more than my house is worth.  Particularly when you include Realtor fees, and closing cost, I cannot afford to sell".  There is a whole host of reasons sellers find themselves in such a position:

  • They paid too much for their house, and bought it at the top of the market
  • They have not owned it long enough to build equity, or perhaps they had an Adjustable Rate or Interest only Mortgage.
  • Another reason may be they had a zero down mortgage, and financed all the closing cost into the loan, and as such have not built enough equity.
  • Some Seller took out a second loan to remodel or pay college tuition for a child
  • Others may unfortunately be going through an expensive divorce that is eating away at community assets

The list of reasons are endless.  Many such sellers consider drastic steps, such as turning the keys back over to the Bank, or perhaps filing for bankrupt.  Either of which will trash the credit of the seller for years to come.

A typical Sellers situation may look something like this:  The Seller purchased the property three years ago at the top of the market for $300,000, financing in their loan origination fee, and other closing cost.  Two years ago the eldest child went to college, and they refinanced, pulling out $30,000 equity to pay college tuition.  Now there has been a downturn in the market, and because they had an Adjustiable Rate Mortgage, their loan payment has increased by $500 a month.  They can no longer make ends meet, and have to sell.  Their current mortgage payoff is $330,000, however the Realtor tells them the market value of their home is only $300,000.  Additionally it will cost them about $25,000 to sell their property.  Anyway you slice it, these Sellers are upside down by about $55,000.  They are considering filing bankrupty, or simply turning the keys back into the bank.

Such sellers may qualify for a little know secret banks do not readily advertise, it is refered to in the Real Estate community as the "Short Sale Process".  Basically the bank does not want to become the owner of your house, they are not in the business of owning real estate holdings, they are in the money lending.  Therefore the bank may be willing to forgive the seller of the difference, and allow the property to be sold for current market value.  Often times in is more cost effective for the Bank to cut their losses and move on, rather than go through the foreclosure process.

The "Short Sell Process" requires a Realtor who is familiar with the process, and can help the Seller navigate through this complicate process.  Further the Seller and the Property both need to qualify.  If a seller has a 2nd or 3rd note on the property, it becomes much more difficult to get all the variouse lenders to agree to participate.

If you would like more information on the Short Sale Process, please feel free to contact us.