|Short sales by their very nature are complicated and unique to the specific mortgage holder (or holders) and a specific property. The short sale process begins when the mortgage holder decides to sell his house, even though its market value might be less than the amount he owes on the mortgage. A short sale can begin initially without any bank involvement. The seller puts it on the market at a price determined by his agent, in comparing it to other similar properties that have recently sold in that neighborhood. When a buyer appears, a special short sale offer to purchase contract is written and then signed by the buyer and the seller. An important piece of the short sale contract is a document called a Short Sale Addendum which defines the short sale contract as being dependent on the approval of all the mortgage holders. It will be a three party contract – buyer, seller, mortgage holder.
Some of the key attributes of a short sale are:
- A short sale list price reflects seller/agent opinion of market price, but this price may not be approved by the Bank.
- The mortgage holder (Bank), through its loss mitigation process, will determine whether or not a specific seller qualifies as being a short seller. Generally, if the seller has a large amount of other tangible assets, the Bank has to decide whether to incur the expense involved in a foreclosure and go after the would be seller’s other assets, or simply to allow the sale to go forward and forgive the difference.
- If the Bank determines that the best solution to the problem is to allow the short seller to sell his house, then the Bank will determine its acceptable price by hiring an independent appraiser. Once the appraisal is completed and the price is determined, it will become the new contract price. The contract previously agreed upon between buyer and seller will be voided by a modifying Counter Offer stating the Bank’s acceptable price.
- The buyer will either cancel the contract or accept the Bank’s newly established price. If the buyer agrees to the price, the contract goes forward to closing. If the buyer does not accept, then the seller will start again by relisting his house at the newly established price. Or if too much time has gone by, the Bank may decide to foreclose.