Chris wrote the following article for the Commercial Real Estate section of the Maine Sunday Telegram. In the article, I breifly outline the "short sale" process and what it entails. The column will run on Sunday July 6, 2008:
As a result of the current “mortgage crisis”, many folks who over-leveraged in order to purchase property in the last several years are finding themselves precariously close to losing their home or investment to foreclosure. In certain instances, a short sale is advantages to both the flailing property owner and a savvy investor.
A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, it is required that the lender approve the proposed sale.
This sounds like a no-brainer to an investor as in most cases the property is acquired for much less than what the appraised value was a short time ago. However, these transactions differ from conventional transactions in several ways.
First, expect the process to take 90 to 180 days (or more). There are often several tiers of approvals required, depending on the lender.
Second, understand that you are dealing with a seller who’s motivation to sell is limited only to avoiding foreclosure. They stand to gain nothing else; if that is not sufficiently important to them, their actions may seem irrational and counter-productive to getting the deal closed.
Thirdly, the property has likely been neglected and will probably need some amount of work in order to be brought up to par.
An investor’s ability to work through the obstacles is essential to securing a property through short sale. But a sound strategy, patience, and diligence will pay off with the addition of instant equity to your portfolio.
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