Steps to Buying and Selling Short Sales

Written By Steps To Faculty Published April 30th, 2010

Are you thinking of a short sale? In real estate, a short sale occurs when a homeowner arranges with a bank to give them the home for less than what it is really worth to help the bank offload any losses. Short sales usually happen when the home buyer is near foreclosure or when the bank has no other financial choice but to accept the loss resulting from such a sale. To the home seller, this is commonly more like exclusive option only that in this case one has to buy the property first when the economy is in recess and later sells at a higher margin profit. There are several steps that homeowners take to prepare for a short sale.

Step 1 Obtain a market assessment

The first step homeowners take is to obtain a market assessment of the value of the house. By doing so, s/he is able to determine how much to pay the bank to negotiate the release of the lien.

Step 2 Determine the full cost to sell

Next, the homeowner determines the cost of selling the house. These estimates include the cost of a broker and the cost of using a real estate agent.

Step 3 Sum up the total amount outstanding on the house

The next step in the short sale process includes summing up all loans and other debts against the value of the home. This step is painful. The homeowner usually takes the difference between the anticipated proceeds from the sale of the house and the sum total of what is owed against the home. Since the homeowner is looking selling short, the value will most likely be negative.

Step 4 Talk to the creditor

Upon getting the necessary estimates, the homeowner now speaks to the creditor, lien holder, or bank and presents their dire situation. During the meeting, the seller usually explains that there is no other alternative than to do a short sale of the home. There is no guarantee that the creditor or bank will oblige and aid in a short sale of the home. In some instances, the bank officers will state that the debt of the homeowner is not the concern of the creditor. In other cases, however, the lien holder will be willing to make concessions to curb their losses.

Remember, like any other sale, keep track of totals for the next tax season.

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