Even on the San Francisco Peninsula, short sales do occur.
A short sale occurs when the existing loan balance on the property is greater than the value of the home.
The property is placed on the market and an offer is obtained which is accepted by the owner subject to the lender’s approval. The lender’s approval must be obtained before the sale can proceed and close. The lender needs to agree to accept less payment of an amount of money less than the current loan balance.
For example, there is a property with a $600,000 loan on it that is currently worth $500,000. An offer is obtained at $500,000 and then the offer is sent to lender for their approval. The lender does their own appraisal of the property. If you can convince lender property is only worth $500,000 in the current market then they may agree to take $500,000 now as full payoff of the loan instead of taking 6 months to foreclose on the property and then put property on the market and then sell for only $500,000 anyway and maybe less if the property or the market continues to deteriorate.
James Wexler, a real estate in the Scottsdale/Phoenix area has written an excellent post where he goes into detail how to make the short sale process easier and less time-consuming.
2 responses so far ↓
1 Susan // Jul 15, 2008 at 2:05 pm
Short sales really require a bit of a strong heart from buyers to go through the process.
2 Arn Cenedella // Jul 15, 2008 at 2:10 pm
Susan
you are so right but sometimes they are worth the effort.
Arn
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