5 Potential Problems with Short Sales

Are you facing foreclosure? One strategy some people try to use in this situation is a short sale. A short sale is when you negotiate to sell your home for less than you owe on the mortgage and have the lender release the lien on the property.

While this might seem like a simple solution, there are a number of risks associated with short sales. For example, in last week’s blog we talked about deficiency judgments, which could make you liable for the rest of what you owe on your mortgage even after you’ve sold the property. This week, we’re going to talk about some of the other potential problems you could encounter with a short sale.


Short Sale Problems

They’re Not That Short

It’s not uncommon for a short sale to take weeks or months. It’s very common for the lender to reject the first offer, leading to frustration on the part of the buyer and seller. It’s important to realize that if you’re really pressed for time, a short sale is probably not going to meet your needs.

Lowball Offers

Why is the lender likely to reject the first offer? When buyers see short sales, some are tempted to make a lowball offer to try to get a good deal. It’s very unlikely that the bank will accept this offer. Their counteroffer will be higher than the buyer wants to pay, and the buyer will lose interest. This is a waste of your time, and brings you that much closer to foreclosure without any progress.

Buyer Legitimacy

Sometimes, when it comes time for the buyer to make a move, it’s discovered that they can’t meet the qualifications needed to buy, such as getting approved for a loan. Now, once again, you’re back to square one with less time than when you started.

Junior Lienholder

A junior lienholder is a party that holds an additional lien on your property that is not your first mortgage lender. This includes second mortgage lenders, tax liens, judgment liens, or home equity lines of credit. In order for a short sale to go forward, everyone has to sign off on it, including any junior lienholders. This can take a lot of time.

What happens is the primary lender offers the junior lienholder a portion of the profit from the sale. But usually, the junior wants more than they’re offered. This can lead to stalled negotiations that halt a short sale in its tracks.

Errors in Documentation

Sometimes, even if all parties are in agreement, a simple problem with documentation can throw everything off. They might be missing, not signed and dated correctly, or not drawn up in time. Whatever the case, if the papers aren’t together by closing, the sale won’t happen.

A Short Sale Alternative

Are you looking for an alternative to a short sale? What about a sale that takes 7 days or less, every time? We can make it happen. Grays Home Solutions is a home buyer in the Tri-state area that helps homeowners who are facing foreclosure. If you call us, we’ll make an offer on your home and (if you accept) buy it within 7 days. You won’t have to make any repairs on your home, and we may be able to pay you in cash, depending on your situation. Interested in learning more? Use our fast response contact form to get in touch with us online, or call us direct at 240-347-3141 for even faster service. Don’t delay!