Are we upside down yet? Short sales revisited.

As a REALTOR here specializing in homes sales in Louisville, Kentucky, I am seeing more and more home sellers “upside down”. Upside down means that the homeowner owes more than the property will sell for. This creates a problem when trying to sell the home since most owners aren’t able to bring cash to the closing table.

While there are several solutions, many more sellers are now looking at short sales. These are homeowners that have been struggling to make payments but just can’t keep it up. While it used to be that lenders would not consider a short sale until the owner was at least 90 days past due for payments, we are seeing some of the lenders are now approving short sales when the payment is current or only 30 days late. This situation requires a lot of paperwork and proof of hardship and is a time consuming process so many REALTORS shy away from them.

When you have a homeowner that has developed a hardship (loss of job, illness, divorce) that decreases the family income, they will often try to stay current and maintain good credit for as long as possible. When they realize they can’t keep up, they often try to sell their home only to find that the sales price won’t cover expenses. This means they’ll have to negotiate for a short sale or let it go to foreclosure.

Negotiating a short sale is tedious and time consuming. It usually requires a team approach involving the sellers, the lender, the REALTOR and a really knowledgeable real estate attorney. It is very difficult for sellers and REALTORS to find the appropriate department, much more so the actual person, with the authority to approve a short sale. I have found that the attorney gets a much quicker and better response from the lender.