As with most other parts of the county, Maine has also experienced an increase in short sales – but in many cases the average homeowner does not really understand what a short sale is and what are the potential benefits compared to foreclosure or bankruptcy.
In the most fundamental of terms, as short sale occurs when a home’s sales value is less then the outstanding mortgage debt plus sales costs (sometimes called an “upside down Mortgage”), and the bank holding the note has agreed to write off a portion of the outstanding loan debt in order to consummate the sale. Lenders will entertain such an option if they believe they will usually receive a higher percentage of their principal back as compared to forcing the property into foreclosure and run the risk of property neglect or damage, and additional delays and costs, and the long-run possibility of property owner bankruptcy.
The consummation of a short sale can be difficult, as we have learned first hand from processing such transactions in recent months. Additional paperwork and intricate negotiations between the real estate agent and the mortgage banker are the norm. Basically, the real estate professional must prove to the lender that the homeowner has a financial hardship and as a result cannot stay current with monthly payments. Financial duress can due to job layoffs, illnesses, divorce, or even the unexpected large increase in mortgage payments due to interest rate resets are all valid reasons.
Many lenders, however, will not commit to a short sale until there is a valid and firm purchase offer in hand from a qualified new buyer, and a knowledgeable broker who can negotiate the transaction. At a minimum the information required will include the purchase offer contract, buyers detailed loan qualifications, a realistic and detailed analysis of the fair market value of the home, current local real estate market conditions, and financial information and hardship letter from the homeowner.
When considering purchasing a short sale property several things to keep in mind include:
Be Patient – the process is time consuming and you should expect delays.
Commission – Expect this to be negotiated by the lender.
Authority – The lender will make all the decisions; the seller has no authority.
Market Value – Be prudent in working with your real estate professional to ensure that an accurate CMA is produced.
Inspections – Ensure that your offer includes a contingency for inspections, keeping in mind that the property is being sold “As Is”. The lender will not compensate the buyer for defects in the property.
And finally, keep in mind that this is an emotional and embarrassing time for the seller. Attempting to balance sympathy and professionalism will be an important attribute to success.
Posted by: Michael Sosnowski
Categories:
Maine Real Estate
Legal