Qualify for Short Sales
Clearing Up the Mystery of Short Sales
Often you will hear people say you won’t qualify for a short sale, don’t bother. Is that sound advice? Unless that person is the bank president or investor on that particular loan, I’m not sure that advice is based in any facts whatsoever. There isn’t a uniform, mathematical formula to determine if someone qualifies for a short sale.
When to Consider a Short Sale
- Every short sale is different, given the circumstances of the property owner and the particular investor or lender on the loan.
- In the investment property context, rental properties may be underwater with negative cash flow. The investor of the property may be in sound financial shape, but the annual loss on the property is starting to take its toll. Could that investor do a short sale on their investment property? The answer is almost always maybe.
- First of all, it’s important to realize that there is no legal right to do a short sale. Bottom line: you agreed to repay the debt regardless of the value of the property. The bank did not promise your property would increase in value. However, when it comes to making a sound business decision, it might make sense to try to do a short sale on an investment property. Lawyers have been doing loan workouts on large commercial deals for decades. A short sale is simply another term for a loan workout, but on a smaller scale. A bank will certainly take a hard look at a sound buyer for the investment property and it is possible they will consider settling the accounts with the investor-seller.
What to Expect in a Short Sale
- If the investor-seller has some available cash or is willing to sign a promissory note for a percentage of the deficiency balance on the loan, a deal is more likely to happen in the investment property context.
- How will you know if your lender will work with you? You have to start the process by listing the property and letting your Realtor market your property to hopefully find a good buyer. Given the complex nature of these deals, getting an attorney and law firm on your side is always a good idea.
- What do I need to get started? Just complete the Short Sale Materials Packet and return to Morgan Kavanaugh.