Short Sale Vs. Regular Sale

Are they different?

by bob Stephens, CBR, e-PRo

Not much! Let's look at it this way. A regular normal sale contains an offer and an acceptance by the seller. The contract then is packed with contingencies that are pretty much in favor of the buyer. They can walk away from the deal in many ways as the deal progresses. The seller does not have this ability unless the buyer breaches the contract. Most notable of the contingencies, usually, is that the buyer must borrow money to buy the house and has a financing contingency to obtain a loan from a lender.
Now let's look at it in the "short sale" mode. Everything is the same including an OFFER by the buyer and an ACCEPTANCE by the seller, except there is a contingency regarding lenders for BOTH the buyer and the seller. The seller owes MORE to the lender than the house is worth and must now ask the lender to "forgive" some of the money owed to them to be able to close the deal. As you see, there are two lenders involved in this transaction- one for the buyer and one for the seller. And as always the lenders make a lot of demands on paperwork to clear their delas and be able to close. The paperwork is just a little different: the seller must be able to prove hardship and document WHY he cannot pay what he owes the lender. On the other hand, the buyer must prove WHY and how he can pay back the lender.
Neither of these lenders OWNS the house and never will unless they are forced to foreclose on it. The seller's lender has a lien on it that must be released so that the buyer's lender has clear title and can then place a new lien on the home.
There is a misconception that the seller's lender seems to be the only one that has any power. Yes, of course they have some power, but so does the buyer's lender; the buyer's lender makes loans as a business to make money; the seller's lender wants to make the deal so they don't have the great expense of foreclosure. Too many forclosures and they will have a real problem getting their loans insured.
I hope a different lok at the transactions will make them a little cleaner.
Bob Stephens is a managing broker of West USA Realty