If you purchased your home in the last ten years, the current market value is possibly less than what you originally paid. And if you made only a small down payment, (5% or less) combined with the costs of selling a home, (approximately 10% of the sales price) you may very well be “underwater” on your mortgage. Meaning that when you sell your home and pay the required closing costs, there is not enough money to pay off the note and satisfy the lender. Not a good situation and hence the term “distressed sale”.
What is a “distressed property”?
In simple terms a property may be considered “distressed” when the sale process is not customary. It may be a “bank owned” property that has gone through foreclosure process or a “short sale” where the home owner is trying to avoid that fate. In a customary sale, the seller tries to maximize the sales price by making the home attractive to buyers, i.e. clean carpets, paint, de-clutter, landscaping, etc…This way the home owner receives as much money as possible from the sale. In a distressed sale this is not the case.
If the home has been foreclosed upon and the bank is now the owner all they want to do is unload the property as quickly and cheaply as possible. They will usually not spend any money on repairs or making the home appealing to buyers. In a short sale, the seller knows that will not be receiving any proceeds from sale, consequently they also will not spend any money. Both scenarios result in a distress sale…at reduced values.
If you find yourself in this circumstance it can feel overwhelming, however, there are a number of effective strategies that may allow a distressed property owner to sell rather than experiencing foreclosure. A successful short sale will have fewer negative impacts on a seller's credit score and credit history.
Below is “Short Sale vs Foreclosure” information – which you can download and print out – that compares the impacts of these 2 actions. For military homeowners who are facing a permanent change of station and must move as a result, the attached press releases offer some helpful news for short sellers.
Patience and a skilled real estate professional are two things you will need during a short sale transaction. I have successfully negotiated over 40 short sales since 2010 – mostly in North Kitsap. Prior to listing a property, every aspect of the potential sale must be researched so that I have the resources needed to negotiate with the lender. Complex deals like this require the seller's cooperation from start to finish. While it might take 3 months or longer to complete a sale, nearly 90% of my transactions end successfully and bring my clients a welcome sense of relief.
Short Sale & Distressed Property Information