Short Sale Austin TX
Short Sale Austin TX
Most likely, if you are searching for the term “Short Sale Austin TX” on the web, you are probably a homeowner trying to figure out your options. Although the economy has bounced back, for the most part, from the recession in 2008, short sales are still the only way out for some, even in “seller’s” markets like Austin. In 2008, the housing bubble had burst and many homeowners were left hanging out to dry while the mortgage payments kept coming. The reality is, short sales happened before the 2008 financial crisis, and continue to happen today.
What is short selling?
To make sure we are all on the same page, a short sale is the sale of a property for less than the amount owed on the mortgage. For the sake of this article, we will focus on residential properties. Typically, when a homeowner is considering a short sale, it is as a consequence to a major life event such as divorce, job loss, serious illness, or even death of a loved one. The property owner is looking to get out from under the house and move on with his or her life.
Believe it or not, often times banks welcome short sales. From their point of view, it is better to sell the house soon, even at a discount, than have to go through the foreclosure process (we will talk about the foreclosure process in a later article). A non-performing mortgage, one where the homeowner is not paying, makes the bank’s profits look that much smaller and ties up funds that could be put to work earning the lender more returns. To put it simply, banks make their money on loans and can’t afford to have much of it tied up in a property that will end up costing them time and capital to settle. Time ends up costing the bank more money. If you are tired of spending time to work with the bank, call us now! We are short sale specialists and can help you start fresh.
Things to Consider
Keep in mind, banks are businesses too. They care about profits and bottom lines. Though short sales can be a relief for homeowners facing hard times, the bank is still going to protect itself before looking out for the welfare of the homeowner. Typically, before settling on a short sale, the bank may choose to pursue a loan modification. In this scenario, the mortgage can be restructured to allow for lesser payments, but also with longer terms. The homeowner may end up with a more affordable mortgage in the short term, but the cost of the house will be more than originally agreed to in the end. Here, the homeowner gets to keep the house and mortgage, and the bank gets to make more on the mortgage than it would have before. In dealing with short term hardships (for example, acute illness, job transition, etc.), this may be the best option for a homeowner who wants to keep their house.
Often, the reality is that the issues causing the homeowner to not afford the mortgage are things that will not go away quickly. Job loss, for example, is an unfortunate circumstance that takes an average of 6 months before getting back on your feet. In these instances, loan modifications may not be the answer. If a short sale is the only viable option (aside from foreclosure) of getting out from under this property, the bank will need to approve of the sale and/or economic hardship claimed by the property owner.
What if the property is already being foreclosed on?
Though the foreclosure process adds to the pressure and time crunch, the battle is not over yet. In Texas, the bank must provide 21 days of advance notice to the property owner before the trustee sale. In other words, you have 21 days left to salvage the situation. The good news is an approved short sale stops the foreclosure. If the property owner is able to find a buyer, agree on a sales price, and sign a contract for the sale, then there is still hope….provided the bank approves of the sale.
In rapidly appreciating markets, the odds of the bank approving of a short sale are slightly decreased than in other locations, but that does not mean it is impossible. Banks, like any good business, will do their due diligence before making potentially costly decisions. There is a chance one of their staff will search for data online in the same fashion a homeowner would. Looking up terms such as “Short Sale Austin TX”, “Average home price Austin TX”, etc. are probably still on the bank’s computer’s search history.
What about my credit?
Any instance where the individual pays back less than the loan amount will result in a negative impact on their credit rating. Some scenarios will have greater implications than others. In this case, a short sale will have a lesser effect than being foreclosed on, which will prove useful if the individual chooses to apply for credit for another purchase in the near future. The dip in credit rating will also depend on how many payments the homeowner was delinquent prior to completing the short sale.
How do I complete a Short Sale?
If you have made it this far, a short sale is probably your best bet. Here is how I would recommend agents and homeowners go about completing the process:
- Talk to the bank and get the payoff amount for the mortgage. This may clarify whether it is even a short sale to begin with.
- Follow up with the bank to request a short sale package. Each bank will have their own way of doing things and will want certain documents, completed in a certain order, etc. This step is critical! If not completed correctly or the way they want it, the bank will hold up the process until it’s done to their liking. Keep in mind, you are already on a time crunch.
- Complete the short sale package and submit it to the lender (bank). A day or two after, be sure to follow up with them to confirm they have received it. As mentioned before, time is of the essence.
- Schedule an appraisal or Broker’s Price Opinion (BPO). The bank will want to do some research to ensure this is the right path for all parties. The appraisal can make or break this transaction.
- Educate the evaluator. It is crucial for the agent, homeowner, and/or any interested party that wants the short sale to go through to meet the appraiser at the property. If the appraisal comes back too high, the bank is more likely to deny the short sale. Bring the accepted offer, information on comparable properties, estimate of needed repairs, etc. that will help justify the sales price.
- Negotiate with the bank’s Loss Mitigator. If the short sale is declined, you or your agent will need to plead your case to validate the sales price.
Summary
Short sales can be a potentially credit-saving maneuver for a homeowner. By avoiding the foreclosure process and getting the individual out from under the property, the bank is able to write the property off of their books, the seller (homeowner) can start fresh at a new residence or location, and the buyer now has a property in which to build equity. If you feel a short sale is the right option for you, call us now!