This is one we've seen and heard quite frequently.  We got it again this week on one of our listings.

In a short sale, the SELLER is the seller.  Confused?  The homeowner is the seller.  Not the bank.  There is a misconception out there, that seems to be pretty common.  Buyers don't always understand that the lender is not the seller.  When the lender is the seller it is an REO, a Foreclosure.

In a short sale, the homeowner is trying to prevent foreclosure.  They have had a change in circumstances which makes it impossible for them to continue to keep the home.  Usually they are not up-to-date on their payments, sometimes they are.  When they realize that they can't keep their home and do not just want to sit back and wait for a foreclosure to happen, and can not get a modification or refinance, some homeowners will attempt to sell their home short.

The lender is not the one responsible for negotiating the contract.  The homeowner is the seller.  The homeowner is who the negotiations take place with when there is an offer on the property. 

The lender's function in a short sale is to release the lien.  This is the same as the lender's function in any other straight resale.  The only difference is they have to make the decision about whether they should release the lien or not given the price, market conditions and fair market value of the property.  If the offer is good and meets specific criteria, and nets the bank a high enough dollar amount, they will usually approve the deal.  When they approve the deal, they are agreeing to release the lien.  This is what it is about.  This is simple, and a non-issue, in a straight resale because why would they not release the lien when they are getting all of their money.  The fact that the bank will not be getting all of their money back is the reason that it is more complicated to get the bank to release a lien on a short sale.

When an offer comes in on a short sale, the negotiation is between the buyer and the seller.  If the buyer and seller can both agree on the price and terms both parties sign the contract and are bound to the terms of the agreement.  The transaction then proceeds.  The only difference is that an extra layer is added because you have to get the bank to agree to release the lien.  That is what makes a short sale take longer.

We have seen short sale offers listing the bank as the seller.  This is not correct.  The homeowner is the one who has to agree to sell the property.  The homeowner is the one who is selling the property.  Not the bank.

We have seen short sale offers (got one this week) where the buyer wants to submit the offer, but refuses to deal with the seller.  They want the seller to submit the offer to the bank because "they want to negotiate with the bank" and "they don't want the seller to decide what price the bank will accept"  This is wrong.  The seller is who the sales contract is with.  It does a buyer no good for the seller to submit an offer to the bank that is not binding on the homeowner who is the seller of the home.  A bank wants to see a legitimate CONTRACT (not an offer no one is bound to).  Without a contract, there is no deal to release a lien for.  The seller is not bound in any way to the deal and can sell the property to any buyer who comes along.  Why would a buyer want to submit an offer to someone who is not even the seller and wait for them to respond when the real seller can enter a contract with someone else to sell the property?  We don't have the answer to this.  We think it's because the potential buyers simply don't understand what a short sale is.

Make sure you are educated!  If you would like to buy a short sale, make sure your agent is a specialist and is well versed in the way a short sale works and very comfortable with the process.  We can help you with any short sale in the Jacksonville real estate market.  Let us know if you need help.

If you can no longer make payments and need to sell your home, give us a call.  Representing a seller in a short sale is a very complicated, detailed job.  Make sure you are giving it to someone who knows how to handle this type of transaction successfully.  Winging it is not an option on a short sale.  You can contact us here.