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The following was a post we did in February of 2009. Not much

has changed in 1 year.   We are expecting the government to start incentives

to banks and second mortgage lenders to encourage the short sale process

instead of  waiting for foreclosure.


  1. House usually sells for a higher price
  2. Credit of the seller is not affected for as long
  3. Neighborhood is not affected as adversely

The term Short Sale has nothing to do with the time it takes to close

this type of transaction.  It refers to the money the bank or mortgage holder

will receive from the sale of the property.  The closing will be “short” of the

funds that the seller owes on the mortgage. In other words, they are upside

down: they owe more than the home is currently worth.

upside down house

Since we don’t live in a past world where the home “was” worth more or

a future world where it “may” be worth more,  this is the sad financial

situation many reluctant  home sellers find themselves in today, selling at

a loss. It doesn’t make for happy campers.

The Short Sale scenario usually doesn’t have anything to do with

greed or mismanaging money.  Many of the cases we see are typical families

that bought a home, fixed it up a little, and then got a job transfer, had a job

loss, a divorce, a family death or illness occurred which drastically changed

their financial situation.

not happy

What the falling prices on homes does is trap the homeowner.

He can’t sell it for what he paid for it—— he has to take a loss, go bankrupt,

or lose his credit rating.   How many people have equity in their home, or

savings, or a 401K they can borrow from to pay their losses?  We see that

occasionally, but it is not the rule.

The banks and mortgage companies are in a difficult situation.

They are going to take a loss, no matter what happens. The object is to stall,

wait, and negotiate until they get the best outcome they can for their company’s

bottom line.  Okay, companies stay in business by minimizing losses.

But, and this is a big but, stalling, and prolonging these transactions

until the potential buyers walk away is hurting everyone.  Delaying a month,

two months, three months on answering a decent real estate offer hurts the

bank, the seller, the buyer, and the real estate agent.  This kind of time lag is

typical of short sales.  I have heard getting these transactions to close as

compared to  ” trying to land a 747 on a blade of grass. ”

Real Estate agents don’t like to get involved in these transactions

because they are prolonged, messy, tons of paperwork, many, many frustrating

phone calls, and at the end of the transaction, the bank or mortgage company

will typically “short” the commission the agent has worked for. This is another

sticky wicket because the contract is with the seller, not the mortgage lender.

So, this has to be negotiated again, if you are fortunate.  If not, you take what

they will give you.

Short Sales are becoming a much more common transaction as

banks are deluged with foreclosures and calls from homeowners requesting

help.  The recent * Recovery Act may be a relief valve, allowing some people

to reduce their mortgage, save their credit and their home. The first week of

March the US government will tell us what the parameters of their plan are

going to be.

*We have seen little effect from the Recovery Act yet.

Make sure your agent has the experience and knowledge to get you

through the minefield of short sale negotiation, if you are buying

or selling.


The authors of the this blog write about Grand Rapids Real Estate, the Greater Grand Rapids MI area, and what it is like to live in West Michigan. Grand Rapids Michigan is a vibrant, growing metropolitan area with a diverse business community, great medical research & services, numerous universities, plus lively arts and entertainment of all kinds.

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August 2020