What to Expect with Bank Short Sale Real Estate Transactions

A bank short sale is sometimes offered to borrowers who have fallen behind in their mortgage payments. When lenders enter into short sale arrangements they agree to accept less money than is owed on the mortgage note. Convincing a bank to accept a loss on their investment is no easy task, but can be accomplished.

Engaging in bank short sale transactions is a tedious process that typically takes four to six months to complete. Banks assign a loss mitigator to handle the borrower's account. This individual will mediate between the lender, borrower and buyer.

Every mortgage lender handles short sales differently. Most require borrowers to obtain a qualified buyer before granting short sale approval. Others will grant borrowers time to list their property through a realtor; usually two to three months.

Homeowners who have a buyer lined up will improve their chance of obtaining approval to sell their property short. Lenders do not want to wait and see if a buyer will qualify for financing. They want to sell the property as quickly as possible and recoup some of their losses.

Banks are allowed to hold a certain number of real estate owned (REO) properties. With the constant flow of foreclosures, many banks are nearing their limit. Short selling allows banks to liquidate their less profitable real estate holdings.

Lenders usually hold well-maintained houses or real estate located in popular locations. They anticipate the market will turn around; allowing them to sell the property for a higher price in the future. Liquidated properties usually require significant repairs or renovations.

Short sale properties are usually sold below market value, which makes them attractive to investors. Real estate investors can purchase properties for pennies on the dollar, rehab the house and potentially earn a good return on investment.

Borrowers who need to sell their house fast to prevent foreclosure should seek out real estate investors or investment groups. These individuals often purchase real estate with cash in order to expedite the transaction.

It is best to work with investors who possess experience with short sales. As mentioned before, the short sale process is complicated. One incomplete document or missed deadline can prevent the transaction from taking place. Few people can undergo the process without assistance from a loss mitigator, real estate attorney or short sale specialist.

It is crucial to determine the type of short sale arrangement offered by your lender. Some mortgage financiers accept the purchase price as payment in full. When the property sells, the borrower is released from the loan. Short sales will affect the borrower's credit score, but not as much as foreclosure.

Some mortgage lenders hold the borrower responsible for the difference between the loan balance and sale price. When borrowers are unable to pay the full amount, lenders issue a deficiency judgment. The judgment remains on credit reports until the debt is paid in full.

Deficiency judgments have far-reaching effects. Obtaining credit of any type will be next to impossible. If fortunate enough to obtain credit, chances are the borrower will pay high interest rates.

Cell phone providers, insurance carriers, utility companies and landlords generally charge a higher security deposit for "high-risk" borrowers. These additional costs can amount to several thousand dollars over the course of time.

When lenders only engage in deficiency judgments, it might be a better financial decision to allow the property to fall into foreclosure. If this occurs, borrowers should attempt to obtain a deed in lieu of foreclosure agreement which releases them from the real estate.

Without a deed in lieu agreement, the real estate is placed for sale through auction or returned to the lender. Once the property sells, the borrower will be responsible for the difference. Just as with short sales, banks can obtain deficiency judgments against foreclosure real estate.

There are many considerations when entering into bank short sales. Become educated about the process and what is involved. Then work with professionals who can guide you throughout the process.


Simon Volkov specializes in buying and selling bank short sale real estate. Simon is a well-respected short sale specialist and author of "Short Sale Hardship Letter eBook Course". To date, Simon has engaged in nearly 400 successful short sale transactions. If you need help selling your home to avoid foreclosure visit www.SimonVolkov.com today.