This is one of the questions I am asked most by sellers who are interested in a short sale. In most cases, it is not really an issue as the majority of sellers face very difficult times. These people are already behind on their payments or are current, but having exhausted nearly all of their available cash and credit trying to stay afloat, will begin missing payments.
There is a lot of confusion out there. Most of it born of perceptions created in the loan modification process. Many banks told their servicing clients they would not be considered for a loan modification unless they missed payments. Some banks even required them to be seriously delinquent in order to demonstrate a hardship.
The short sale is a very similar process to loan modification; both are considered “workout” programs. Examples of these programs may include short sales, deed-in-lieu of foreclosure, forbearance, loan modification. The purpose of a loan workout is to modify the terms of a loan in order to prevent the borrower from becoming delinquent or worse, default. The difference is in a short sale, you don’t have to be late to begin the short sale process.
If a seller determines quickly that loan modification is not a remedy that can really solve their problems, then there is no reason to delay, and a short sale should be considered quickly. This is especially true here in the Las Vegas real estate market where values have plummeted 50% in many areas. Without a write-down of the loan balance, how much can playing around with interest rates, balloon payments, and the length of the loan term really mean to someone whose $300,000 home is now worth $140,000?
There are a few key points to a potential seller wanting to do a short sale while being current. First, you will have to demonstrate you are facing imminent default. You can make it a few payments but the end-game is known. A seller with a lender with a reputation of making very slow decisions on short sale approvals might make this option impossible or at the least very expensive. The last factor is your agent. Your agent cannot listen to every $8 dollar an hour customer service rep stonewalling them with their command of “bank policy” and must know to demonstrate their clients’ immediate need for a short sale to an uncaring institution.
While there is no guarantee that a short sale will be completed without the seller eventually having to miss payments, I hope this dispels the myth that a seller must be delinquent in all cases when attempting to do a short sale.
Paul Rowe is the listing agent team leader for the Sena Team at North American Realty of Nevada. For a personal evaluation, click here to request an appointment or call our team at 702-376-0088.