Short sales are gaining in popularity after years of "foreclosure" being shorthand for the recent housing crisis, particularly in Georgia. In fact, another state with ravaged real estate (California) recently saw the number of short sales surpass the sale of foreclosures for the first time since the start of the crash. So what's the deal? You've heard short sales are a pain to deal with, but that can't always be the case, right? Well, yes and no. While the definition of a short sale hasn't changed, the way they're dealt with has somewhat. Here's the scoop ...
Simply put, short sales — also known as pre-foreclosure sales — happen when a home is sold for less than the value of the mortgage. It's something the lender must agree to, and for the rest of the process they are the one calling the shots. This is where some of the aforementioned headaches come in.
The seller still works with an agent to market the property, but the lender is the one setting the selling price, reviewing offers and finalizing the sale. It's this involvement from the lender that led to the horror stories of yore, i.e. a short sale that took 6 months to pin down.
However, things seem to be changing.
Banks are just as sick of foreclosures as the rest of the country. The foreclosure process is long, messy and usually contentious. Short sales benefit lenders in that they don't have the task of selling what's usually a home that's been empty for a while and needs repairs; the seller typically stays in the house until the lender accepts the right offer. Another reason that lenders are switching to short sales is that they're simply more familiar with them at this point; pre-crash they were relatively rare.
For the seller, a short sale means less credit damage than foreclosure, meaning that rebuilding the score takes less time. In addition, the lender will often agree to forgive the portion of the loan not covered by the selling price. And while the short sale process is no walk in the park, it beats the nightmare that is foreclosure. Buyers are able to get a deal on a house that usually needs less work than one that's been foreclosed; the tradeoff is the extra time and paperwork that's invariably involved. While the waiting game has gotten better, it can still take two to three months to have a decision made by the lender.
So granted the lender agrees to it, a short sale can save a desperate homeowner considerable headache. It's a perfect illustration of the glass being "half full." Potential buyers need to educate themselves on the process and know what they're getting into before they envision where the credenza's going to go; the best idea is finding an agent who has considerable experience with short sales. Nothing's ever as simple as it seems in the crazy game of real estate.
— By Curbed Atlanta contributor Jonathan Carnright