Many of you are hearing about short sales, but perhaps you are uncertain about what a short sale is. A short sale is when the seller of a home has an outstanding mortgage or mortgages that exceed the current market value of the property. Currently in Sparks, short sales represent about 25% of the active listings and 45% of the pending sales. They key is that since April 2008 they have only accounted for 15% of the closed sales.
In contrast bank owned properties currently acccount for only about 13% of the active properties and 30% of the pending sales. Yet since April 2008 they account for over 40% of the homes sold.
So with more active listings and pending sales being short sales why aren’t more closing? The answer to this is that there are some key criteria that determine whether or not a short sale has a high success rate to get to closing. Here are the key factors:
- Is there more than one mortgage on the property? If there are multiple mortgages on the property the likelihood of a successful close go down. Further if the mortgages are with two different lienholders the chances of closing on the short sale drop significantly.
- Does the seller have a ligitimate hardship and are they willing to accept the consequences that might be required by the lender – for example a promissory note?
- The knowledge of the listing agent in the transaction and their experience closing short sale transactions is key. These transactions require many additional hours of work by the listing agent and training on how to navigate the short sale systems that vary so widely from lender to lender.
- Time. Because of the volume of short sales that are in our market and markets across the country, many lenders were not prepared for the large number of borrowers that are facing difficulties. Their back log of files can cause a lag in the time it takes to get the bank to respond once an offer is submitted. Therefore many buyers loose patience and move on to another property where they can close more quickly – either a bank owned or traditional seller.
So to sellers in Sparks I say, if you are in a short sale situation be sure to contact a qualified agent to list your property. Ensure that they have experience in closing this type of transaction and do everything you can to cooperate with your listing agent, your lender and the prospective buyer who will all be working to help you out of this stressful situation.