A short sale is when a property is sold for less than what is owed on the mortgage principal balance, and is structured as a way for both the homeowner and lender to reduce their respective losses.
More often than not, short sales are reserved for situations of extreme financial hardship; prior to a bank beginning foreclosure proceedings.
Homeowners are usually required to prove the merits a short sale to their lender, which involves documenting that selling the home for less than its worth is the best and most viable option for all parties involved.
The short sale process starts with a letter of hardship. Skilled real estate professionals can assist you in understanding what needs to go in the letter.
To prove o the bank that a short sale is your best option, you’ll be asked to submit a cover letter which explains your hardship and to provide full financial disclosure. You’ll also need your original purchase contract, a balance sheet of your income and expenses, your asset statements and proof of income, and two years of federal tax returns in addition to other documents specifically required by your lender. Each lender has their own set of requirements but there are standard requirements common to all.
Lenders prefer handwritten letters and are more apt to agree to a short sale for homeowners who may have lost jobs or encountered significant medical bills. However, if this doesn’t describe your situation you may still qualify. Our team attorney will consult with you to help you determine if you are a likely candidate and to discuss all your options.
Draft a compelling letter and avoid extraneous details. Be short, be thorough, and be complete.
In addition, note that the following traits can help speed your short sale approval :
- The home is marketable
- A second lien holder, if one exists, is agreeable to a short sale
- A foreclosure is not scheduled within the immediate future
Choosing to short sale your home in Jacksonville or anywhere else, though, is not something a homeowner should pursue alone. Fortunately for Jacksonville homeowners, there are a number of qualified teams such as the Fennell Team who are can provide guidance throughout the process.
Before You Short Sale Your Home
Before you decide to short sale your home, there are a few things that you need to know. If you have previously consulted with a short sale expert, they should have already gone over these things with you. Short sales are a relatively new concept for most homeowners and even for a lot of real estate agents. Some agents simply refuse to deal with them (which is a good thing if they don’t have the time and resources to work them effectively). Other agents shouldn’t be working short sales because they don’t have the knowledge, time and/or resources to do them right.
One of the first things to be aware of before you short sale your home is to know what a deficiency is and how it can affect your short sale. Basically, the deficiency amount is the difference between what you owe and the amount of your sale. For example, if you owe $250,000 on your mortgage and you short sell your home for $175,000, your deficiency amount is $75,000. The deficiency amount is important because if the full amount is forgiven, you could owe taxes on it the following year or, depending on your lender and your settlement, they could try to come after you in the future for the deficiency amount. Our team, which consists of a real estate attorney, has a very good track record at getting a release of deficiency but there is no guaranty. Every short sale situation is unique.
If you are considering a short sale, you should also be aware of the foreclosure timeline. Some short sales take longer than others and you certainly don’t want to run out of time to complete your short sale. Obviously, the sooner you begin the short sale process after realizing you cannot continue making your mortgage payments, the better.
It’s also important to know what type of mortgage you have because there are programs available to help homeowners depending on their investor or mortgage type. Our team will assist you in all these matters.
Sugar Mill Condos – Market Report
Sugar Mill Condos have been among the most popular condo developments in Mandarin over the past decade. During the real estate boom years, Sugar Mill Condos became a hot market for homestead purchases and for investment real estate. But then the recession came and Sugar Mill fell victim to steadily declining values like other condominium developments throughout the Jacksonville area.
Property values in Sugar Mill Condos are about 30% to 40% what they were at the peak of the housing boom. That’s the bad news. The good news is that values appear to have bottomed out and sales are brisk. In fact, as of today there are no active listings in Sugar Mill Condos.
Five condos have sold in the last six months and another seven are pending sale at this time. The average price per square foot for all is about $35. With bargain prices like this it is no wonder that investors and resident buyers are coming out of the woodwork to buy now.
For many people who bought a Sugar Mill Condo at the top of the market, the question asked is “should I sell my condo now or should I hang onto it?” This is a question that many homeowners are asking themselves and the answer varies depending on individual circumstances and needs.
My wife and I faced this question last year in regards to several of our own investment properties and we made the decision to short sell rather than hold on waiting for the market to rebound. Many others have made the same decision. What about you? If you are the owner of a Sugar Mill Condo or any other real estate, for that matter, here are some things to consider.
Although sale prices have varied a little bit in Sugar Mill, when accounting for condition, size and location the price per square foot is pretty consistent. As a seller, you set the asking price however the “market” determines the selling price and “appraised value.” It is imperative to set an asking price in line with “market value” in order to attract qualified buyers.
If you are like most sellers, the market value for your home may come as a bit of a surprise… even knowing that the market has been in decline for the past 5 years. The good news for you is that values appear to have stabilized in Sugar Mill Condos and many other Jacksonville communities.
That said, even the most optimistic predictions allow for only about a 2%-3% increase in value over the next 12-24 months, followed by a more “normal” appreciation rate of 4%-5% per year after that. This is why my wife and I made the decision to short sale all of our investment properties last year.
For instance, if a property were purchased for $160,000 and now has a market value of $80,000 (very typical scenario), utilizing the above optimistic predictions (3% next 2 years and 5% thereafter) it will take 17 years just to break even. That may be okay if the owner plans to hold the property for at least that long and has a positive cash flow over the life of ownership but for those who do not want to hold or who do not show a positive cash flow and struggling to make their payments, it may make more sense to cut losses now. Every situation is unique so each property owner has to assess their own situation and goals before making a decision.
The vast majority of people who purchased property between 2005 and 2009 are facing short sales when selling today unless they paid cash or made a substantial downpayment when originally purchasing their property. Short sales in have become the “norm” in much of our market and this is certainly true for Sugar Mill Condos. We negotiate short sales daily… in fact, my wife/partner works 40 hours per week with our attorney now in negotiating short sales with the banks.
More info can be found on our website in the Short Sale Center and Real Estate Attorney pages. I would encourage you to check the info on our site for answers to some basic questions. Consider the information carefully and call us if you have other questions or if you’d like to schedule a no-obligation consultation to go over your specific situation. We know from our own experience and working with many other sellers that these are not easy decisions to make.
We are here to help in every way possible. Call Tim at 904-568-4528 to discuss your options.
View Current Active Condo Listings In Zip Code 32257
Jacksonville Real Estate Market – Trends for July, 2011
Will Lower Prices Spur Selling Activity?
The jury is still out on whether or not we will see improvements. This is due mostly to continued economic troubles plaguing the nation as a whole.
Jacksonville, Florida real estate has continued a trend it has followed for many months with declining prices in most hyper-local markets but some increase in the number of closed transactions.
Agent surveys indicate that traffic (interest from qualified buyers) increased at the end of the month after continued decreases from June as sellers have continued to reduce prices to meet the low demand. Interest rates are lower than ever but there is concern that they could increase quickly and this concern seems to be holding many buyers back from committing.
This fear of commitment is due to the large number of Jacksonville homes for sale that are under water and therefore are Short Sales. Short sales, as everyone now knows, are anything but “short” in terms of the amount of time required to close the transaction.
Buyer traffic had fallen sharply in June so the increase in July was notable. It isn’t unusual for traffic to decline in early summer and pick up toward the middle and end of summer as families begin to think of moving before school starts back. Whether or not this increase in traffic will produce an increase in sales is still up in the air. Time will tell…
The fact remains that motivated sellers who price their Jacksonville real estate at or slightly below fair market value are first in line to attract the attention of qualified buyers. If these sellers also have adequate equity in their homes to avoid a short sale situation that’s even better!
Cash buyers, particularly in the higher end market, appear to be making their move more and more as they anticipate that we are likely at the bottom of the market decline.
As your straight-talking real estate consultants, you can always count on us to present a true picture of the market. We know that now is not the time for every buyer to make their move… we also know that now is the perfect time for others. If you are on the fence, don’t hesitate to contact us. We are happy to help you make the decision that is right for you and your family.
With the large number of great deals in Jacksonville real estate today due to the large number of foreclosures and short sales, why would a buyer want to make a back-up offer? Why not just move on to find some other house for sale and make an offer on it?
The first accepted offer that a seller receives and signs becomes the primary contract. Most contracts to purchase are made with contingencies such as loan approval, acceptable home inspection, mortgagee approval on a short sale, etc. It is not uncommon for other offers to be presented after the primary contract is signed and these other offers are considered back-up offers.
Submitting a back-up offer in today’s market is an especially good idea. It has always been true that contracts fall apart over inspection and financing issues and with today’s much stricter financing guidelines this has become more and more common in the Jacksonville real estate market.
If you are extremely interested in a property and have time to wait a few weeks, we highly recommend submitting a back-up offer. Your chances of getting that home you really want may be better than you think and you have absolutely nothing to lose by making the back-up offer since you can always rescind the offer if you find another home for sale that you like as much or more.
When submitting a back-up offer, your agent will assist you in carefully reviewing, presenting and negotiating all terms of your offer with the seller. To further insure your interests are properly protected, you may wish to consult an attorney.
If the primary buyer’s contract fails to close for whatever reason, the buyer and seller will need to sign a contract release after which the seller must notify you that your back-up offer is now the primary contract. From this point on you will be required by contract to proceed per your contract terms.