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What is a Short Sale?
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- Опубліковано 16 кві 2019
- What is a short sale in real estate? What is the difference between foreclosure vs short sale? A real estate short sale is when the money earned from selling a property is less than the debts accrued from purchasing the property.
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This occurs when the property depreciates over time and the owner must sell the property.
The country saw the biggest spike in short sales during the 2006 economic recession when property prices dropped.
Homeowners, who were impacted by the recession, suffered financial hardships and had to sell their homes because they could not afford the mortgage rate.
Because homeowners sold their property at a lower price than what they owned, the transaction was a short sale.
This created problems between homeowners and their mortgage loan lenders, such as banks.
Depending on the situation, the debts unpaid were forgiven. Banks base their forgiveness decision on the property owners' current financial status.
If there's no way they can repay the money, often times the bank will forgive the property owner. But, this isn't always the case.
Short sales will mean you don't earn back all the money you spent on purchasing a property. When this happens, it's often a sign of devalued property.
#shortsale #realestateshortsale #shortsalesexplained
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Loved you're spelling it out. You made it easy to understand after I've tried a couple of times already...to dissect and understand a short sale, but was still fuzzy on it. You made it clear to me. Thanks so much!
We're so happy we were able to make this concept easy to understand. That's the goal of the channel! Thanks for watching and letting us know your thoughts too, it's really appreciated. If you have a moment, please give this video a like, subscribe to our channel, and hit the bell icon! That's the best way to get notified when we release a new video and it helps other people find our content as well! It also helps our channel grow so we can continue making videos like the one you just watched. Thanks again for watching!
Thank you so much for your easy to understand videos. English is my third language and you are the only person I look for when I have a doubt or don’t understand my real estate classes. Gracias, Ariagto & thank you so much 🙏🏻
You're very welcome! Thanks for watching and glad I could help.
How about the buyer of the property? What type of issues may they have when purchasing a home that had a short sale?
I have the same question. How does it affect the buyer?
I noticed that no one answers this question. We live in a market that screws the buyer. There's a lot of hidden information out there, that people don't tell you. Information is power!!! do your research. Don't be a victim of con artist.
I survived a short sell in 2016. I managed to close within 45 days because I offered more money then what they asked for. I drank so much during that time. I couldn't believe I landed the deal and that quick!
Best explanation of a short sale.
Wow! Thanks for the kind words! I'm glad you liked the explanation. Hope to hear from you again, Jeff!
I have a 80 thousand mortgage loan and currently own 40 on it now, I've been here 12 years but am now moving out of state and can't take the note with me. Do I have any options that would be a smart way to go about this?
Loved the video, it was very informative. Thank you.
Happy you like these videos. Thanks for watching.
Another Awesome video!
Thank you so much🙏
You make all the material very easy to understand. Your videos are always my to go to videos to understand everything about real estate
Happy to hear that! Thanks for always being a viewer and a commenter! I appreciate your viewership!
Great video I have always wanted to do real estate ever since I played monopoly as a child and I believe this is an avenue I will be strongly considering.
That's super exciting!
Nah your Godfather of real estate shout out to you ☄️🔥
Baddabing baddaboom.
Perfect explanation!!!! Thank you🎉
Glad you liked it!! Thanks for watching!
Wonderful explanation, thanks!
Glad it was helpful! Thanks for watching.
Great video! You made this topic very easy to understand. Thank you!!
Thank YOU for watching! We're so happy you found this video helpful. Subscribe to our channel and hit the bell icon to stay up to date on new videos like this one!
This was a great breakdown, thank you so much! My only question is, how does the bank benefit at all from this? Seems like the bank just lost $400K and got nothing back, so thats where Im a bit lost. Great video regardless!
Good question! The house serves as collateral when paying off the mortgage. If the house enters foreclosure and is auctioned off, the bank collects the money. There's a chance the bank might not make its money back on it but it hopes to make as much money as it can from the auction. Hope that helps! Thanks for watching.
Jama, hey man solid question! In short - the bank loses less for several reasons. Maybe Mr. Robert Rico can chime in on what I'm about to say. A vacant and abandoned house is hard to sell, an occupied house with residents that have no benefit in the sale is really hard to sell. Not to mention the cost of insuring a vacant house is crazy expensive. On the flip side the home-owners who are catching a break will at least not leave the place trashed, keep up the insurance whilst it sells, and it will most times sell for more than at auction. Banks are not in the business of property management - it's a tough business and they know it.
Great video. Thank you so much for sharing with us all.
I have a question, tho.
I live in Texas, and I'm short selling my home using a group within a popular real-estate company.
How much should I pay them once the sale is completed?
I'm selling my home for a little less than two hundred thousand. I really don't have any money to pay them anything.
Yes Rico I am with you!😁
Glad to have you with me! Thanks for watching!!
Thank you sir!. New follower!
Awesome, thank you!
Thank you for another quality video.
Thanks, Edrick! Share this video with a friend or colleague that you think would find it helpful. We always appreciate the support!
Great video, straight to the point!
Thanks for your viewership vbuen323. Glad you enjoyed the video!
You are amazing!
Thanks for watching, Cynthia! Don't forget to like the video, subscribe, and hit the bell icon! That's how I keep the videos coming and doing so let's you get notified when I release a new vid just like this one. Thanks for watching and I hope to hear from you again!
how does this benefit the buyer ?? I seen a house for short sale at a good price but I never dealt with short sales before
Typically, short sales can be good for the buyer because they are able to negotiate a lower price because there is a higher need to sell the house. Hope that helps and please let me know if you have any other questions. Thanks for watching and I hope to hear from you again, Frank!
Awesome explanation
Glad you liked it! Thanks for watching.
Why does it take so long to sell it?
Is there gonna be any issues for the person buying it?
great question...
can you post and show a short sale application. and does the seller have to pay tax oh the money forgiveness by the lender?
Where have you been all my career. Soooo easy to understand. 🥰👍
Glad you liked the video, Canita! Be sure to share these videos with your friends or people you know to help us grow a bigger channel!
So it a good thing?
Yes and no. It gives people a way out of debt that they cannot repay but also that means they lose their house and get no money for it.
I was in a short sale there was smoke soot from a fire in the area insurance company sent me a check with me and Banks name on it , I cleaned up everything myself deal closed 2017 the bank never asked for the Check during closing so now the check so now it is setting in unclaimed property with both names on it. How does this work?
Then what's the risk of buying a home if banks are going to forgive the difference during a short sale?
Severe damage to your credit. Bad credit makes taking loans (and in some cases renting) extremely challenging. It has long-term ripple effects. Hope that helps.
Thank you for clearing so smoothly. I still have small doubt. If the borrower has Junior or secondary mortgage, how will it be handled?
Wish I had seen this earlier, lol, took my test yesterday (passed) but there was a question about this that I now know I got wrong. Of all the avenues I used to study, none of them mentioned short sales.
Darn! Nonetheless, congratulations on passing the state exam.
Who pays the commissions and other fees associated with the transaction? Will the bank pick up those costs ?
*Correct!* The bank covers the fees and costs so the borrower doesn't have to cover it.
so it's not especially profitable when you turn around to sell it? once you own a property after a short sale, you're hoping for the market to improve??
Yes and no. When you purchase a short sale, you will hope that the market to improve (as with all property investments) so you can sell it at a higher price. But, if you're the fixer upper type and depending on the property, there are ways to increase the property value quickly without the market improving (unless there is a dramatic crash of course). It really depends on what your intention is with the short sale property. There are ways you can make money off the property and ways you could lose money.
hey, good point explaining a short sale. So, as a home owner, you are trying to sell the home for a lot less than its actually worth. Do you have to get the banks approval to do a short sale or can you already go and list it for less than its worth without contacting the bank first?
Thank you. Very informative: How long does it takes for this process? once the borrower has found a person to short sale too, the borrower is free and clear, so what is the process of the new borrower on that loan? does it starts all over on the loan? will the then new borrower is able to sale? Thank you in advance. I appreciate your platform.
The process of a short sale entails separate lenders, the seller's lender (mortgage on the home) and the buyer's lender ( loan for the home purchase). The buyer is purchasing the home similar to a traditional sale with a loan from Bank A, while the seller is dealing with their lender (mortgage) Bank B to reduce the payoff amount. These two lenders are in no way related to each other, unless Bank A and Bank B are the same bank. I believe you are referring to an "assumable loan" with the example you provided. Hope this clarifies your questions!
Wouldn't the $400,000 forgiven in this case be considered taxable income?
You are correct. The IRS taxes forgiven debt the same as income.
Great video. Except, why would the bank allow a short sell? Wouldn’t that be bad for the one lending?
On the contrary, David. When a homeowner has fallen behind on their mortgage payments, a lender typically will proceed with the foreclosure process. This will require that the homeowner vacate the premises while the lender legally takes back possession of the property. The lender will then put the vacant property up for sale, in hopes that a buyer will purchase it soon after. While the property is vacant, there is a possibility that the home can be vandalized, squatters can gain illegal possession, and the landscaping can deteriorate. These factors can reduce the value of the home. In a short sale situation, the homeowner continues to live in the property, thus eliminating the possibility of vandals and squatters. In addition, the homeowner maintains the landscaping which will keep the property attractive and the value remains strong. The homeowner will vacate the property once the property is sold to a buyer. Hope this clarifies your question.
Would you please explain the difference between joint tenancy and tendency in common . Thanks
*Hey, Sima!* I made a video on it. Here it is: ua-cam.com/video/5VBVXFXU0cc/v-deo.html
Thanks for the suggestion!
Hi,
Thank you for this video. I have a question, i have a commercial building. And i can not pay it off. It is worth much much less what the markets price now. I wan to do short sale will this hurt my credit score? I found some one willing to pay some of the loan ballance. But will this save me from ruining my credit scores? I wish you explain this in your vedio. I heard if i can find a buyer and buy it even for a certain price i will save my credit scores. And that is one difference between short sale and forecloser saving my credit scores and they forgive me. Is that true?
Kindly.
Pauline
What if the bank does not forgive the difference would you still have to pay the difference
When a short sale is approved by the lender, the homeowner/borrower is typically released from having to repay the difference from the sale amount of the property and the loan amount owed by the seller. For example, if the homeowner sells the property for 700K (current property value), but owes 1M to the lender, an approved short sale would forgive the seller/borrower for the 300K difference. Hope this helps and please let me know if you have any other questions. Thanks for watching! Don't forget to like, subscribe, and hit that bell icon to get notified when we release new videos like this one!
How about if you have the cash to buy the short sale. Is it still a long process?
Cash may theoretically help expedite the process but the major reason why short sales take so long is because of the bureaucracy behind a bank coordinated transaction. There's a lot of checks and balances that go into short sales on the listing end.
I lie Rico's presentations! they are easy to understand but complete in the information that needs to be shared however complex the information is !
Thanks for watching, Radha! We're so happy you find our videos helpful.
subbed
Thanks for subscribing and watching the video!! I appreciate it.
So the only knock to me as the buyer is I may have to wait a while to get into it?
Correct! For buyers, there's not much of a difference. You'll just be waiting on the extra party. Thanks for watching!
Is it wise to buy a short sale house? Or just look elsewhere?
Good question, Anay. There are pros and cons to short sales that you should weigh before investing. Depending on how much you want the property, it won't matter if it's a short sale. Some short sales get a negative reputation because the transaction process tends to be longer. However, you will be getting the price at a lower price which could work in your favor long term. To answer your question, it depends. If time isn't an issue and you're comfortable with the short sale process, then it will be wise to buy. But, if you rather not deal with the trouble and just want to purchase a house, then it would be good to move on. Hope this helps!
So to start off you have to fine a realtor to work with or do you work with the lender?
Thanks for watching Billy F! When a homeowner is considering a short sale, it is typical for the homeowner to contact the lender and let them know of their situation. Communication with the lender is crucial. Once the owner and lender discuss the options, the lender will typically recommend that the owner hire a real estate agent to facilitate the short sale. Don't forget to subscribe to our channel!
You are great!😉
Thanks, Jueun! You're great for watching this video!
Can the bank approve a Short Sale and still hold the owner responsable for the remaining balance
Hi, Mario. GREAT question! The owner, when their house is sold via short sale, is off the debt hook. They don't have to make payments to their debt after the house is sold. Of course, to make this happen, the debtor will have to provide proof that they cannot make the payments back and thus need to sell their house. Hope that helps and please let me know if you have any other questions!
The person buying the house don't get stuck with any of that debt right?
Hi, Trak Master. Good question. The person buying the home does not take on any of the previous owner's debt. Thanks for watching!
Would the home owner still be required to make payments until they sale. What if they dont owe more that what the home is worth how does this impact a short sale?
When a borrower requests for a short sale, the borrower must prove to the lender that they are unable to keep up with the mortgage and are in a financial hardship. By applying for the short sale, the borrower is typically unable to make the mortgage payments and the lender is aware of this through borrower provided documentation. Thanks for watching! Don't forget to like, subscribe, and hit that bell icon to get notified when we release new videos like this one!
One more thing! If the owner does not owe more than the house is worth, this is considered equity and the borrower can sell the property for profit from the sell of the property. Another option is for the borrower to request a loan modification if the mortgage has become a financial hardship and the borrower is struggling to make the payments. It is always best to communicate with the lender when struggling with mortgage obligations.
You didn't mention that when someone short sales it effects their credit
Good point. I'll be sure to share this information in the description of this video!
What does short sale means to the buyer??
A short sale typically gives the buyer more leverage in the negotiation process because the seller wants to close the sale. Also, the buyer can expect a longer than usual transaction process because short sales have more people involved. Hope this gives you a good idea of what to expect as a buyer!
Hi, first I want to your classes are great! Thank you for sharing. I subscribed it. 🎊🎊🎊I have questions for you.
How about the 400,000? Never have to pay back to the bank?🤔🤔🤔so, can I say the bank is very kind here.🤣😂😂my poin is, in what condition, the bank will be kind like this? Anytime?🤔🤔🤔
Hi, there! Thanks for being a student and taking our classes! I'm glad you enjoyed them and they're helping you learn about real estate. In regards to the $400,000-the bank will forgive that amount of money because there is no way for the homeowner (who conducted the short sale) can pay it back. The house being sold is the collateral. Hope this helps and thanks for watching and subscribing!!
do one on Lis Pendens please!
Interesting. I'll pass this along to the content team!
What about the tax liens
Hey, Jackpot Winner! Do you have something specific I can help you figure out related to tax liens on a short sale? Thanks!
hey quick question if im looking in to wholesaling and i find that the property im looking into wholesaling is a short sale would it be worth it?
It is definitely worth it if the list price has already been approved by the short sale bank. Once the short sale bank (lender) approves the short sale and list price, you can run the transaction as a traditional sale. If the short sale has not been approved yet, the short sale approval and approval of list price from the lender can be lengthy process. Good luck!
Loving the sharpness. Thanks man!
You bet! Thanks for watching.
Would you need a seperate certificate to do short sales?
Good question! You don't need a special certificate to be a short sales focused agent. So, have at it! Hope this helps and please keep me updated on your career. I love hearing from active agents who watch our videos. If you have a moment, please like this video, subscribe to the channel, and hit the bell icon. That's the best way to get notified when we release new content and it helps our channel grow! Hope to hear from you again.
so where the catch then?
The catch is a big strike against your credit, which will make borrowing money, renting, and homeownership extraordinarily difficult in the future. Also, the amount of money lost in the process of making repayments.
@@USRealtyTraining ahh right, they get to keep all the money you paid them up till that point if i understand correctly. Also where did you learn all those things... its very interesting... will i learn this if i study a deggree? or find an aprenticeship or more youtube videos? thanks for the quick reply btw
I dont think there is a real estate degree specificly... maybe finance or economics or busines but im not sure.
@@joshuapelton61 You know, I learned this all from working as a real estate agent, doing personal research, and enrolling in an accredited real estate school. If you're interested in becoming a real estate agent or just wanting to learn more about the real estate industry, an accredited school (like my school) is a great option. Are you thinking about getting into real estate?
@@USRealtyTraining @CA Realty Training ahhh nice...the thing is, i am having difficulty getting an apprenticeship or junior position in real estate because they usually want experience or I am just not invited in interviews for some other reason. Yes absolutely interested in real estate, but i am not in the usa, im in the uk, if you could suggest a few could accredited schools where I would gain knowledge similar to your videos over here in the UK I would really apreciate it.
✅ 🎓💯Make studying for the real estate exam EASY: bit.ly/46L59T9