A real life short sale scenario.
To help you to better understand the short sale process, we have
assembled a recent case study for your own review and study. The
scenario will help you better understand the reasons and motivations
behind a short sale transaction.
Tom and Marilyn owned their 2,500 square foot ranch home for 7 years.
The year prior to their Tom losing his job, they had obtained a new
mortgage on the home in the amount of $240,000 with their bank.
Over the course of the past several years, the home had suffered from
deferred maintenance on the walls, doors, carpet and exterior. Given the
softness of the real estate market and their desire to vacate their
home, they initially they put the home on the market at $220,000. 75
days on market produced no offers, so the price was reduced to $205,000.
After a number of weeks on the market, several offers were received, one
at $195,000 and the other at $197,500.
The lender involved in this short sale counter-offered at $200,000,
based upon the expectation the their net proceeds would amount to no
less than $194,500, after seller-related closing costs, commissions and
past due property taxes. The buyers agreed to increase their purchase
price from $187,500 to $190,000 and the Sellers received a letter of
investor acceptance, outlining that the loan would be considered “paid
in full”, with the remittance of the net proceeds.
The lender, in this actual transaction, accepted a loss of $52,095 or a
23% loss on their total balance owed. This home was listed at the
reduced list price on September 21, went under contract on October 22
and closed on November 15, just one month before the scheduled
foreclosure auction date.