Short Sale When Buying or Selling Your Crested Butte Home
You might encounter a short sale when buying or selling your Crested Butte home. A short sale is distressed sale where the proceeds from the sale of the home will be less than the loan amount on the home. And the seller does not have the funds to pay the bank the differential. The buyer and seller agree on a price and terms in a Contract to Buy and Sell. But the bank must approve the contract, and will seek to collect as much from the seller as possible to make up the difference between the proceeds of the sale and the loan amount due.
This is an unfortunate scenario for a seller. During the downturn in the economy and the market, I represented both buyers and sellers on short sale and foreclosure properties. One of the challenges of a short sale is waiting for the bank to respond. During the worst of the economic downturn, banks were overwhelmed with distressed properties and so patience was a virtue and hard to come by. Here’s everything you should know about dealing with a short sale when buying or selling your Crested Butte home.
What To Do If You Are the Seller in a Short Sale
If you have a loan on the property and you can no longer afford the monthly mortgage payments, you may be facing foreclosure. If the loan amount is higher than the net proceeds from the sale, and you don’t have ample funds to make up the difference at closing, then you are “under water” and in a short-sale situation.
The reality is your property will not sell quickly as a short sale, because the bank will need to be involved in the process. The bank will have the final approval of the sales price and terms, also known as short sale approval. As well, this will be dependent on their negotiating with you to recover any losses they will incur.
You need to be sure your real estate agent knows your situation, and that you select a real estate agent who is familiar with short sales. You should definitely contact a local attorney who has experience in real estate foreclosures and short sales. It would be an added benefit if you hired an attorney who has specifically negotiated with the bank that your loan is with.
Possible Issues For Buyer in a Short Sale
While most of the impact of a short sale is on the seller, the buyer is certainly affected by it as well. I have one example where I was representing a very nice couple who were the buyer and were under contract on a home that was a short sale. In this transaction, we finally got a response from the bank that said they agreed to the contract terms, but at a higher price. Since the seller was underwater and distressed, this meant the buyer had to make a decision if they wanted to agree to the increased price, or negotiate.
We came to terms on the price with the bank and set a closing date forty-five days out. The buyer did not want to go through the expense of inspection if the bank was going to be unreasonable, and the deal was going to fall apart, so no inspection had been performed. At this point, the buyer had been under contract, subject to the short sale acceptance, for over ninety days. But the story doesn’t end there…
Dealing With Renters In a Short Sale
When I contacted the listing agent to get a key for the inspector to get into the house, we all got a surprise. The seller had signed a twelve-month lease with a tenant to rent the house. The tenant had moved into the house! We got a copy of the lease and there was a ninety-day Notice to Terminate clause. So we immediately had the seller send a notice to terminate the lease.
Now the really bad news: the renter was a very nice young couple, and the wife was six months pregnant! Do the math. Not good. “Uh, yes your honor, that is correct we want to evict this very nice couple with a newborn baby…” It was a very tight rental market. The renters could not find any other place to rent for the same monthly rental because the seller was renting below market.
My client hired a local attorney and the seller agreed to refund all the rent. The renters agreed to move out and they were permitted to stay in the house for two months rent-free. They eventually found another place and moved out. The closing was delayed because of all of this, but it finally did close. You never know what you might run into with a short sale when buying or selling your Crested Butte home! But it all worked out in the end.
Short Sale When Buying or Selling Your Crested Butte Home Final Thoughts
If you would like to know more about short sale or distressed sale, contact me.
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