As promised here is a bit more on short sales.

I want to do a brief overview on what they are.  This is not by any means a complete writeup.  If you are a homeowner that is in over their head, has no equity and are looking for a way to avoid foreclosure, you might want to consider a short sale.  A short sale will affect your credit negatively .. but it won’t be as bad as having a foreclosure on your record.

A short sale is when the bank agrees to take less than what is owed on the property.   Often it is substainly less.   The bank is motivated to get rid of properties it has to foreclose on.  Instead of having as a performing asset with a nice little income, it is costing them in money in holding costs.  Also having them on the books hurts the banks ability to make new loans.   But even with this reality, banks are not very welcoming to people who want to do a short sale.

There are very specific negotiation techniques that are needed to make the short sale happen and if you are not in the short sale business it’s best to find someone who has done them successfully.

Realtors don’t always understand what a short sale is.  Some think it is just listing the house for less than the market value or less than what is on the loan.   If you are talking to a realtor, make sure they can clearly can tell you what they intend to provide to you.  Most people who do short sales are real estate investors not realtors, and they won’t talk to you if you have signed a listing agreement.

The real estate investor who does short sales will not charge you anything for the service.  In fact if anyone asks you to pay money for a short sale service, run, don’t walk in the other direction.  The investor makes money on the “spread”, the amount that they negogiate the bank down to and what they can sell the house for.  The art of short sales is convincing the bank the property is really worth lot less than the market value and showing the bank they will actually come ahead if they don’t have go through the foreclosure process and have all those holding costs.

Good luck, for anyone who needs to sell, it’s a brutal market out there.