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Short Sales in Charleston, SC
Search all Charleston Short Sales
What is a Short Sale?
A short sale is a pre-foreclosure sale where the homeowners attempt to sell their home for less money than
they owe to the bank in hopes that the bank will forgive their debt. This situation is quite common in
today’s market because prices of homes have fallen from the 2005 & 2006 market highs. Homeowners who bought
during the market high, or who took out a 2nd mortgage based on the 2005 & 2006 market value of their home
will owe more for their home than it is worth in today’s market. If they were to sell at today’s market
price, they would have to come to the closing table with a significant amount of money to make up
the difference. For this reason, they will ask the bank to accept an amount ‘short’ of what they owe;
hence the name “Short Sale”.
Why Would the Lender Agree to a Short Sale?
Lenders operate under one simple rule: Maximize profits and minimize losses. The lenders have found that
they will save and average of $14,000 per transaction if they allow the homeowners to do a short sale
rather than foreclosing on the home. With both a short sale and a foreclosure, the lender will lose money.
However, they will lose less money if they allow the short sale. Here’s why:
The foreclosure process is a long process which usually lasts longer than 6 months. During the process,
the homeowners are not making payments to the lender. The paperwork of the foreclosure and the processing
of this paperwork cost the lender money. Once they foreclose on the home, the time spent finding a REALTOR
to market and sell the foreclosed home cost the lender money. The market time that the home sits on
the market cost the lender money. And the process of evaluating the offers on the foreclosed home cost
the lender money. Additionally, once the lender is in possession of the foreclosed home, they now have
increased liability. Perhaps the home is vandalized, or squatters move in, or a plumbing leak happens.
All of these events could cost the lender money. In the end, the lender will be able to sell the home for
today’s market value.
With a short sale, the lender reduces it’s liability because they never actually own the home. They also
reduce their holding costs because the short sale process is shorter than the foreclosure process.
And, in the end, a short sale results in the home being sold for today’s market value. Therefore,
the lender should elect to allow a short sale whenever they face the decision between foreclosing on
the homeowner or allowing the homeowner to conduct a short sale.
How Long Does it Take to Close a Short Sale?
The term “short sale” is very deceptive. If it were to be named based on the amount of time it takes
to close this transaction, they most likely would be named “extremely long sales”. Based on the experience
of closing short sale transactions in the Charleston area, the REALTORS at CharlestonResource.com estimate
the average short sale transaction to take between 3 and 4 months to close. In some cases, these sales
can take over 6 months to close.
What are the Steps in the Short Sale Process?
The short sale process starts with the seller. Once the seller determines they can no longer make payments
on the home (due to a job transfer, unexpected unemployment, a bad investment decision, or any number of
other reasons) they will attempt to short sell the home rather than succumb to a foreclosure.
At this point, the seller should hire a REALTOR who is knowledgeable about the short sale process and
who can assist them in preparing the needed documents for the short sale to their lender(s).
Once the seller has contacted their lender and provided the lender with the necessary documentation to
begin the short sale process, the seller’s REALTOR will list the home. Potential buyers will view the home
just as they view traditional homes for sale. Once a buyer submits an offer on the short sale home,
the seller should consider if they believe their lender will accept the buyer’s offer before they sign
the offer and submit it to their lender. If the seller believes their lender will accept the offer,
they ratify the contract and submit the offer to their lender for review.
The lender usually takes a long time to assign a negotiator to the short sale. Once the short sale has
an assigned negotiator, the negotiator sends an appraiser to the property to determine the market value.
This value is referred to as the Broker Price Opinion (BPO). Once the lender has the BPO back from
the appraiser, they typically take a very long time before they respond with an acceptance or a rejection
to the short sale offer. If they reject the short sale offer, most often they will submit a counter
offer to the buyer. The buyer does not have the option to counter offer again at this point.
They can either elect to accept the lender’s counter offer, or to reject the counter offer and find
a different home to purchase.
The lenders are ridged and controlling in the short sale process, which makes sense because they are
the ones who are losing thousands of dollars on the transaction. Buyers of short sales often become
frustrated with the amount of time the process takes.
How often do Short Sale Transactions Actually Close?
REALTORS who are experienced with short sales, such as the REALTORS at Charleston Resource, Inc., have
a much higher success rate in getting short sale transactions to close than REALTORS who are inexperienced
with these transactions. The process is long and laborious, and there are many parties involved. The best
short sale negotiators will be able to close 60% of their short sale transactions. The poor short sale
negotiators will close less than 30% of their short sales transactions. As a buyer of a short sale, this
means that even if you work with the best and most experienced REALTORS and negotiators to help you close
on your short sale purchase, 40% of the time, the lender will elect to foreclose on the house anyway.
To make matters worse, you will not know if the lender will accept or deny your short sale purchase until
the end of the short sale process. You may wait 3 to 4 months for your new home and then discover that
the lender has decided to foreclose on the property.
However, if you are working with an experience REALTOR who knows how to protect your best interests,
there are ways to write your offer to purchase a short sale home which will allow you to release your
offer without penalty. This allows the buyer to offer on the short sale while keeping their options open
if they come across a home they like better while they are waiting on a response from the lender.
Does a Short Sale Affect the Seller’s Credit Score?
See this link about
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Should I List my Home as a Short Sale?
See this link about
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