The Bane of My Existence: A Short Sale

"He Said, She Said"
“He Said, She Said”

The “What”, the “How” and the “Why” of a Short Sale

The “What”

A short sale simply means that the homeowner will come up short when they sell their home compared to what they owe their lender. The property won’t sell for enough money to pay off the lender in full after all the closing costs are taken into consideration. “Short sale”  does not necessarily mean that it will be a short and easy process. There are also tax and legal ramifications of a short sale, so read this post with several grains of salt as you seek proper legal and tax counsel.

The “How”

There’s a reason my business partner/husband won’t work on our company’s short sale transactions. He HATES unpredictability and irrationality when it comes to a short sale lender’s need to request documents time after time after time, even after we’ve already sent the requested items multiple times. The start of whether or not a short sale will work depends on the true financial hardship of the sellers. We’ve known many folks who were fully employed with plenty of money in the bank who’ve desired and pursued a short sale. However, short sale lenders, for the most part, won’t necessarily automatically grant a short sale to borrowers who aren’t enduring a documented financial hardship.

In our experience, if a homeowner isn’t experiencing what the lender considers a legitimate hardship, the borrowers will have to be willing to ruin their credit by stopping their mortgage payments in order for the lender to pay attention to the fact that they’re no longer getting a dime out of the homeowners. (The analogy I’ll refer to here is  the neglected teenager who strives for attention by “acting up”.)

The “Why”

We’ve turned down plenty of short sale listing opportunities in recent years. Why do we NOT take on certain short sale transactions? First of all, we need to feel good about what we’re doing in our lives and in our work. It gives us great pleasure to assist a struggling homeowner if we see there to be a legitimate need. We’ve turned down plenty of short sale transactions over the years because the homeowners simply “didn’t want to keep paying their mortgage” on a house that dipped dramatically in value.

My own home dipped in value dramatically for a period of time, and I could have pursued a short sale, no doubt. However, I made a commitment when I secured the loan and was too proud to stop making payments or even pay later. Pride comes before a fall, it has been said. Now, the home has increased in value again almost to what is was when purchased 10 years ago, and I’m glad we hung in there.

The Bottom Line

Short sale lenders look at their bottom line and weigh the benefits of granting a short sale vs. foreclosing on a home. The best of the best short sale lender we’ve worked with are the smaller, community banks/lenders. Fremont Bank and Bank of the West have been among the best and most responsive, in our opinion. Well, in my opinion. Greg won’t touch short sales…