A short sale is the sale of real estate for less than the total debt on the property. In other words, there is no equity in the property. This is also known as being “upside down”.
Short sales typically occur when a property is highly leveraged and the market loses value quickly…like now, especially in California. A bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor, which are most people that own highly leverage property in Southern California.
The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of proposed sales.
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.
A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe
that it will result in a smaller financial loss than foreclosing.
A short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of debt, generally on a piece of real estate, short of the full debt amount.
Lenders have a department (typically called a loss mitigation department), which processes potential short sale transactions. Typically, Lenders do not accept short sale offers or request for short sales until a Notice of Default has been issued or recorded with the locality where the property is located.
But these are not typical times. Banks are now well aware that the longer they wait, the more the they stand to lose so many short sales are happening without notice of default being filed.
Lenders have to approve of any buyer’s or listing agent’s commission in advance, primary reason for non-brokered short sales with a specialist or facilitator to save on the margin. Many of these facilitators work with a private lending party for their financing, such as a partner or syndicate.
Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator’s approval. “Red Tape” is very common in short sales, similar to REO and HUD properties, requiring potentially multiple levels of approvals and conditions. Junior liens, such as second mortgages, HELOC lenders, and HOA (special assessment liens), may need to approve of the short sale.
Frequent objectors to short sales include tax lieners (income, estate or corporate franchise tax-as opposed real property taxes, which have priority even unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale.
Ken Grech is one of the Top Producers for Troop Real Estate. On top of being the Assistant Manager for the Simi Valley Branch office and the Director of Marketing for the company as a whole, he is ranked #7 of all the real estate agents within Troop Real Estate, Inc. He continues to consistently be in the top 1% for production in the nation, and has been for the past ten years.
Mr. Grech specializes in the Ventura County and Conejo Valley areas. The majority of his business is in the Simi Valley, Moorpark, Westlake and Thousand Oaks areas. Although much of his business is conducted in this specific area, Ken still sells many properties throughout the Los Angeles and Santa Clarita areas as well. Ken is also a certified CDPE Short Sale expert. He works with many bank owned homes & foreclosures. Ken has an outstanding working relationship with many banks including Bank of America, Wells Fargo, Chase Bank.
Ken is bilingual, fluent in English and Spanish. He attributes his success to hard work and integrity. His main goal is to provide service that goes above and beyond what is expected of him. Ken prides himself on his aggressive approach in negotiating and marketing. He believes in hard work and strong ethics. He works with clients who expect and demand superior representation and is happy to exceed those expectations.
Ken has been featured in such publications as "Homes & Land" and the "Real Estate Book". He's also been featured in the Daily News and has received awards for his contributions to Care and Share. Ken has been an active member of the Simi Valley community. He has also coached Track at Simi Valley High School. Ken is married to his lovely wife, Tanya, for more than ten years, and has four beautiful children: Karina, Matthew, Isabella, and Christian. He can be contacted by phone at (805) 217-1368 or by email at firstname.lastname@example.org
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