As I’m sending clients listings in Kirkland and other parts of Washington, the listing will occassionally say “Short-Sale”. This isn’t a new term, although it has certainly been used more in the current economy. I’ve been doing short-sales for 10 – 15 years. I have purchased a few houses myself using the short-sale process.
What Short-Sale means is simply the bank is willing to take less (or short) of what they are owed. For example, a home owner relocated to Kirkland, WA in 2005 to join Starbucks as a barista. She bought a house in Kirkland at the top of the market for $600,000. (She’s a well paid Barista). She’s loving life living in Kirkland by the waterfront and hanging out at the great restaurants and parks.
Fast forward to August of 2009. Starbucks lays her off as not as many people are buying $5 cups of coffee. In large part this is due to the lag in the economy, but in Seattle, people are not buying coffee because Howard Schultz sold the Seattle Sonics professional basketball team to an out of state schister who moved the team to Oklahoma City! (my personal view inserted here). The Barista ends up getting laid off and can’t afford her house near the lake anymore. She needs to sell as soon as possible. The problem is that her house is now only worth $500,0000. She misses several months of house payments and she has been given a notice of default and has entered the foreclosure zone.
She uses me as her agent. Knowing the bank is owed more than the house is worth, I contact the bank and ask them if they will do a short-Sale on the house. The bank agrees to take less than is owed if she can find a buyer. I immediately start marketing the house and find a buyer. The bank has sent me a short-sale packet. The short-sale packet includes a request for the seller to put a letter of distress together. This letter explains how the seller got into her predicament. (primarily it’s due to Howard Schultz selling the Sonics to a schister). She is also required to show her income if she has any, bank statements, tax returns, other investments, etc.,. We also put together the purchase agreement with the buyer. We send all of this to the bank.
The bank reviews all of the documentation. They then will send out an appraiser to appraise the house. A smart real estate agent who is on top of things, someone such as myself, will meet the appraiser at the house. He will have his own appraisals alrerady in hand along with a well written spreadsheet showing the appraiser his version of the appraisal. Appraisers usually like this as it saves them time from having to pull their own comparable homes.
The appraiser then sends the Kirkland house appraisal to the bank showing what the Kirkland housing market is like. The bank then approves or rejects the short sale. If approved, the parties proceed to closing. Generally, the bank offers what is called a full reconveyance to the seller. That means, she’s off the hook for owing any money to the bank. (note, rumor is they may be changing at some point). She also avoids foreclosure and having the foreclosure record sit on her credit for 7 to 10 years. Everyone wins and everyone is happy.
If you have any questions on the short-sale process as a seller, or buyer, please feel free to give me a call at 206-979-2660, or visit my website at rodjohnstonre.com.
Tags: Kirkland housing, Kirkland Housing Market, Kirkland Relocation, short-sale
Avg. Sales Price: 379,000
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