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Member Blog Post: What Exactly is a Short Sale by Compass Agent Karyn Flores

There are a lot of wrong ideas out there about short sales because a lot of people just don’t understand what a short sale is and the process behind it. I was introduced to short sales back in 2007 when the real estate on Long Island started to change and there became a big gap between what a seller wanted for their home (because the neighbor down the street just got X price) and what the buyers were willing to pay. During the prior years when the market was a seller’s market and pricing was skyrocketing it was very common for homeowners to maximum their equity in the home and utilize home equity loans to renovate homes, purchase car, boats, a second home. You name it, homeowners were extending themselves 100% of the equity they had in their homes.

In 2007 I had a listing that we priced on the market to cover the homeowner’s payoff with his mortgage lender. It would not sell; all our offers were below our list price meaning my homeowner would not be able to pay off his mortgage at the closing table. He would still owe the bank money or… a short sale. A short sale is when the value of the home is less on the market than what is owed to payoff the mortgage. The homeowner still owns the home and must be willing to participate in a short sale. There is a lot of work on the homeowners behalf in order to get to the closing table with a short sale. The homeowner must document hardship, tax returns, bank statements, paystubs, and many other forms required by the bank. An appraisal or broker price opinion is ordered by the lender for market value. After 3 months of nonpayment a Lis pendes is filed against the property by the bank that holds the mortgage. Again, the homeowner still owns the home and makes a decision to sell and participate in a short sale.

First you negotiate with homeowner and once you have an acceptable with the homeowner you will sign contracts of sale to move forward. The sale is subject to third party approval meaning the mortgager now must give you approval that they are willing to forgive the difference between what is owed to the mortgager and the net left over from the sale. All the homeowner’s fees for selling a home are paid and deducted from the lenders profit leaving the lenders net. If the short sale is approved, the mortgager will provide a short sale approval letter that will include the buyer and sellers names, the exact amount the bank is expecting and a close by expiration date.

In many situations homeowners have a primary mortgage and a home equity line of credit so both would have to be negotiated with their respective mortgager. There would be 2 different short sale packets now creating even more paperwork for the homeowner. It is very important to know who is negotiating and communicating with the mortgager to obtain a short sale approval letter. One of the reasons many people have the belief short sales can take forever to get approved by the mortgager is because many Realtors along with Attorneys would take on the challenge but not know what to do so do nothing. I can’t say enough about how important it is to have a knowledge and experienced team when working with short sales. I have an attorney I have been working with for well over 10 years now and I is essential in success.

Another aspect that leads to short sales taking a long time is the seller. The seller must consistently throughout the process of a short sale update their documents with the mortgager. Providing these documents in a timely matter is crucial to completing a quick short sale. I always collected the initial short sale packet from the seller prior to listing the property so there was no delay once we had fully executed contracts, I could go right to work negotiating with the mortgager. If all things are completed in a timely matter; typically, we could get a short sale approval letter by the time the buyer’s financing was approved.


 Karyn Flores Licensed Associate Real Estate Broker|

O: 631.495.0567 16A Wall St Huntington, NY 11743

As a Compass agent in Long Island, NY Karyn is here to provide you with all the resources and information you need to buy or sell real estate. She works with buyers and sellers in Huntington, Dix Hills, Cold Spring Harbor, Northport, Syosset and the surrounding areas and she has had extensive training in the latest real estate marketing strategies. Karyn is confident that she can offer you knowledge and tools most other agents can’t. Specializing in New Construction sales, Luxury Sales, First-time home buyers.

There are 3 things most important when hiring a Realtor®; skill, integrity and a great internet marketing plan. Karyn prides herself on her knowledge and negotiation skills. Her Personal website is found on Front Page Search Engines guaranteeing more buyers will see your Home. When hiring Karyn, your home will have the most internet exposure leading to the most amount of offers. A broad range of both personal and professional experience contributes to Karyn’s success in the real estate industry. This experience includes: Lead Financial analyst at a top brokerage firm, being the owner of a successful marketing firm for 4 years, having a Master’s degree (MA) in Economics from the University of Buffalo, her extensive travel throughout the continental US, as well as travel to over 24 countries, product Analyst and Cash Management Sales for North Fork Bank, etc. She is a licensed associate real estate broker, CBR, GREEN, SFR, SRES.

Karyn is devoted to making your move as easy as possible and will assist you in every step along the way whether you are selling or buying a home. She looks forward to hearing from you soon!