Hi I'm a real estate agent with Century 21 North Homes Realty in Seattle WA. During my career I have listed and sold more than my share of homes in short sale status. What's a short sale you ask? Well a short sale is basically when the borrower (home owner) owes more money on the house then what the house is worth! It's often thought that a short sale means that the seller is looking for a quick sale!? That couldn't be further from the truth, they are anything but short. It means that the funds are going to be "SHORT” at least that the way I get my clients to understand the term.
If you bought a house for $300,000 with zero money down and sometime later the real estate market crashes, causing the value of your house to fall $100,000 bringing your homes market value to $200,000 in this situation the difference in funds is $100,000. So what happens with that money? It has to come from somewhere right? The answer is yes. In a lot of the cases that I was involved in, the bank had to waive the lien by sending a letter to the escrow company stating that they would be cutting their losses on the $100k and settling for less money. (Some money is better than none) In that case the bank just basically forgives the $100k difference and moves on. In other cases the bank can come after the borrower later for the difference and ask you to pay the $100k in payments! So if you find yourself in this nightmare situation (just like a staggering amount of homeowners have in recent year) pay very close attention to the paper work at closing and ask the escrow agent or your real estate agent a lot of questions so you don't have a surprise later. Going back several years to the early to mid 2000's zero down was a very common loan model and when those kinds of loans were used, there were most likely two lenders involved. One bank would underwrite the loan with $240k and the second lender would pony up the remaining $60,000 bringing the total loan amount to $300k. When a short sale transaction is being executed with two lenders involved like that, the situation get far more complicated and often times ends up in foreclosure. I will blog about this scenario later as it can get very complicated. My advice to sellers that maybe in facing this situation is, DON'T SELL!! If you don't have to sell right now, then don't. Or if you’re a seller that watches the market closely but is not planning on selling anytime soon, don't worry about the housing market! It doesn't matter at all to you unless you’re actually planning on putting your house on the market. Just keep chugging along making your payments and pay no attention to the market because you’re not selling anyway.. Right?
If you are thinking of selling or buying (it’s a great buying market right now) in the greater Seattle area and you need some assistance. I can be reached at bob.mccoy@century21.com
If you bought a house for $300,000 with zero money down and sometime later the real estate market crashes, causing the value of your house to fall $100,000 bringing your homes market value to $200,000 in this situation the difference in funds is $100,000. So what happens with that money? It has to come from somewhere right? The answer is yes. In a lot of the cases that I was involved in, the bank had to waive the lien by sending a letter to the escrow company stating that they would be cutting their losses on the $100k and settling for less money. (Some money is better than none) In that case the bank just basically forgives the $100k difference and moves on. In other cases the bank can come after the borrower later for the difference and ask you to pay the $100k in payments! So if you find yourself in this nightmare situation (just like a staggering amount of homeowners have in recent year) pay very close attention to the paper work at closing and ask the escrow agent or your real estate agent a lot of questions so you don't have a surprise later. Going back several years to the early to mid 2000's zero down was a very common loan model and when those kinds of loans were used, there were most likely two lenders involved. One bank would underwrite the loan with $240k and the second lender would pony up the remaining $60,000 bringing the total loan amount to $300k. When a short sale transaction is being executed with two lenders involved like that, the situation get far more complicated and often times ends up in foreclosure. I will blog about this scenario later as it can get very complicated. My advice to sellers that maybe in facing this situation is, DON'T SELL!! If you don't have to sell right now, then don't. Or if you’re a seller that watches the market closely but is not planning on selling anytime soon, don't worry about the housing market! It doesn't matter at all to you unless you’re actually planning on putting your house on the market. Just keep chugging along making your payments and pay no attention to the market because you’re not selling anyway.. Right?
If you are thinking of selling or buying (it’s a great buying market right now) in the greater Seattle area and you need some assistance. I can be reached at bob.mccoy@century21.com
