A short sale occurs when the value of the property is less than what the mortgage debt is on the property. There are according to the multiple listing service currently 613 single family residences in Long Beach that are listed for sale and out of those 208 are short sales-a 35% short sale total. There are a total of 360 condos listed for sale in Long Beach and out of those 152 are short sales, which is 42% of market.
In the last 6 months there have been 952 condos that have sold in Long Beach and of those 155 were short sales, which is 16% of the market. 2130 single family homes sold in the past 6 months and out of those 334 were short sales for a 15% share of the market. So why the lower sales success rate for short sales?
- The property is listed too low. The bank will order a brokers price opinion on the property and if the property is listed too low there may be issues with approval.
- The short sale package is not complete. The bank requires a hardship letter and other financial documents to complete a short sale package.
- The buyer backs out. It can take time to get a short sale approval from a bank. In the meantime the buyer gets cold feet and backs out and the process has to start over again.
- Home owner association dues are not paid. It is a common problem when the owner does not pay the association dues because the sale cannot go through without the dues being paid. The bank will usually not pay back association dues so either the buyer or seller has to pay them.
The 2nd mortgage holder is not happy. Sometimes the 2nd mortgage holder is not happy with what they are getting which may be nothing. Oftentimes they want something $$$ to sweeten the deal.
There are of course other complicated reasons for a short sale not being approved. For this reason it is important to have a real estate agent that is experiences with short sales and to speak to an attorney and a C.P.A. about the ramifications. Unfortunately many short sales that don't sale wind up becoming bank foreclosures. Starting April 5, 2010 Home Affordable Foreclosure Alternatives Program (HAFA) will start. The program is intended to help simplify the short sale process for some.