Friday, February 17, 2012

New Bern NC Short Sales

What is a short sale?

When the owner of a property owes more on the mortgage than the property is worth and can't make up the difference, the mortgage holder must agree to take less than is owed in order for the owner to sell the property. This is called a short sale. If foreclosure proceedings have already been started but not yet completed, a short sale can also be a pre-foreclosure. That means it is not yet owned by the bank, but the foreclosure process has been started.

Who actually makes the decision to approve a short sale?

Sellers are not allowed to profit in any way from a short sale transaction. So the seller really don’t care what he/she sells the home for. Surprisingly enough, the seller's lender, who is probably only servicing the loan, doesn’t care either. The servicing bank merely collects the appropriate documents and presents the entire file to the investor who is actually holding the note and is owed the money. So the investor is the only one who cares how much the sales price is. And each note has a different investor. Literally, you could have two identical homes with two identical cash offers being serviced by the same bank, and yet one will get approved and the other will not. It is entirely up to the investor holding the note how much, if any, loss they are willing to take.

Why do short sales normally take such a long time?

Servicing banks (like Bank of America, Wells Fargo, Chase, etc.) make money by collecting monthly payments on mortgages notes on behalf of the note investor. As soon as the borrower stops paying on the note, the servicing bank stops making money. The bank then has little monetary incentive to hire a large number of employees or install the necessary infrastructure (computers, faxes, etc.) necessary to complete thousands of complicated files. Often minimum wage employees will quit in the middle of a file, so the next person hired has to start all over again. On top of that, once a file is finally completed, it must be presented to the note holder. If the note holder is a large institution like a major insurance company, it can take a long while to sign off on a substantial loss. It can literally take three to four months to get any sort of an answer back on from the bank on a short sale.

Why do most short sales fail?

Most short sales fail simply because of the time it takes to find out from the bank if they are approved. Even the most serious buyer can become fidgety after a month or two (or more) of waiting to hear something, anything. That is why it is crucial for the seller's agent to give weekly updates to the buyer’s agent, even if there is nothing new to report. Just a steady stream of communication can keep a deal alive. The second most common reason short sales fail is the difference in appraisal values between the short sale bank and the buyer’s lender. Again, a strong listing agent can go a long way toward documenting reasons for a lower sales price, though again this is ultimately the decision of the investor and sometimes those decisions seem to make no sense at all! But it is quite common to see the same property go into escrow several times before a successful closing. There is nothing wrong with the property itself, just the process.

That is why it is vital that the seller, the buyer and the agents all remain calm and be willing to jump through many hoops to a successful close.

Guaranteed, there will be many hoops! :)

But the patient buyer can get a great deal and the seller can walk away with a clean slate, and that is what makes it all worthwhile for both parties.

Use this link to see Short sales currently listed for sale in New Bern North Carolina

And as always if you have any questions or if there is anything else we could help you with give us a call 252-637-7463 or email us at

We are here to help you get the BETS possible deal!