Short Sales vs. Traditional Sales

In a short sale, the homeowner owes more on the mortgage than the market value of the home.  Thus, the sale price of the property will be less than the value of the note creating a loss for the bank and requiring its approval before closing can occur and title is transferred from seller to buyer.

There are many ways in which a short sale and traditional sale are similar. Both require a written purchase contract, with the exception of additional addendums and clauses required for the short sale.  Disclosures remain the same for both types of sales with sellers required to report major defects with the property to the buyer and buyers required to properly inspect the property being purchased.

To discourage offers that are too low, banks will order an appraisal of the property being sold.  In addition, the transaction has to be an arms length transaction whereby the parties to the transaction may not be related or have others types of agreements among them not disclosed to or approved by the bank.  Commissions and other closing costs are paid by the bank. However, the amounts may be lowered by the bank and must be negotiated or accepted by the parties involved for the sale to close.

In a traditional sale the buyer and seller will propose a pre-determined date by which the closing must occur.  In a short sale the bank will issue an approval date by which the closing must occur. A traditional sale process should be a smooth one if all parties involved work diligently to close on time. The short sale process, while not a complicated one, can be full of hiccups and delays and be rather lengthy, regardless of how diligently the parties work.  Remember, short sales are subject to third party approvals and, thus, require more time for a successful closing.

Ray Garcia, Esq.

Board Certified in Real Estate Law

by the Florida Bar

www.raygarcialaw.com