Short Sales and What You Need To Know About Them

What is a Short Sale?

Brevard County Short Sales are the highest in history!

Simply put, a short sale is a prelude to foreclosure.  A better explanation would be...A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers' mortgage along with closing costs including property taxes and real estate fees and the seller is unwilling or unable to cover the difference.

Now, the "short sale" portion is when the lender, after reviewing a sellers situation agrees to possibly accept less than what is owed on the subject property.  Allowing the seller to actually sell his home for less than what is owed on the property and avoiding a nasty foreclosure.  For the most part these sales are like any other sale except the lender makes the decision on the sales price not the seller.

Important note: There are no standard guidelines for lenders regarding short sales, they all have their own way of handling them. You will need to contact YOUR lender to find out exactly how to proceed.  Do not wait until you are behind in payments to call them.  And if it you know it is inevitable that you will eventually be in this position, it is better to do it sooner than later and stop through good money after bad.

Click here to hear a local Brevard County Real Estate attorney talk about the pros and cons of foreclosures.

History Lesson

During the 90's Brevard County had what is considered to be an normal amount of foreclosures and you actually found only a limited number of short sales on the market.  Well this all changed as we went through the real estate boom from about 2001-2005 where prices started to gradually go higher and went to the moon in the latter part of the time frame.  This boom was brought on by extremely low interest rates coupled with "creative financing" with Adjustable Rate Loans, Interest Only Loans, 100% Financing and a few other "predatory" type loans.  These loans allowed home buyers and investors to purchase more home than they could typically afford.  If you could fog a mirror you could get a loan! Now, investors started buying and mortgaging everything in site thinking values would continue to clime and they could make a killing. So did unsuspecting family home buyers. (statistics show that investor purchase were 40% of the market)

BANG! BOOM! CRASH!

The Real Estate market crashed.  Everyone forgot that real estate is a "Market" and it goes up and it will come down it just runs on a 8-12 year cycle.  Now you find all of those who purchased there homes during the rise and peak of the market were not going to be able to sell their homes for what they paid for them.  And to add insult to injury, all those loans that let them buy more home than they could afford had a catch...their interest rates would be going up when the adjustable mortgage or interest only loan came due.  Owners found they could not afford the new payments at the higher interest rate and when they tried to refinance, they found their homes were not valued at what they owed on the loan. They were stuck with a large monthly payment with a high interest rate and could not sell their home for what they owed on it.  All of this brings us to where we are now.

We have a huge inventor of over priced homes on the market. (21 month supply if no other homes come on the market) We have buyers who are afraid to buy because of all the negative press and many can not buy because the lender tightened up their standards.  Many sellers are in shock when they find out the value of their property is 25%-40% less than what they owe on it.  I personally sympathise with all who are in this position.  It just doesn't seem fair.

So, their you have my simple version of what happed here in Brevard and all around the nation.  This is why there are so many short sales and foreclosures.  Unfortunately this trend will probably continue for at least the next 2-3 years as more and more fall prey to this market.