Short Sales in Raleigh NC
A short sale is a term that was virtually unknown a decade ago, but which is now part of every real estate broker’s vocabulary. Basically, a short sale is a sale of mortgaged real property where the proceeds from the sale are insufficient to pay in full the seller’s outstanding mortgage. Because the seller lacks the financial resources to transfer a marketable title, the seller’s lender must consent to the sale and agree to voluntary release the liens.
This is different from a foreclosure. In a foreclosure, sale proceeds are applied to the liens in order of when they were recorded. If there is no money left to pay off additional liens, the lienholders do not get any proceeds. However, in a short sale, it is voluntary so the other lienholders also need to give their approval in order to sell the property.
If you are trying to buy a home via a short sale, beware of outstanding property tax and special assessment liens since they need to be paid off along with the liens.
As of Spring 2011, it was estimated that, nationally, 27% of current property owners owe more on their house than the property is worth. One out of every four sellers will find themselves in a short sale situation.
RealtyTrac reports that there were more than one million foreclosures nationally in 2010 and 1.2 million are projected in 2011. According to the National Association of Realtors, 40% of residential purchases nationally in March 2011 were either short sales or foreclosed properties.
According to North Carolina Association of Realtors, NC is faring better than any states; foreclosures decreased by 27% during the first quarter of 2011 compared to the last quarter of 2010, whereas nationally the rates decreased only 15%.
If a potential short sale situation exists, must a real estate broker disclose this fact? Yes! The fact that the owner is unable to convey marketable title without the express consent of the lienholder is a material fact that must be disclosed.
Must a seller disclose anything to a potential buyer? No! Caveat Emptor is alive and well in North Carolina. A seller selling their own home does not have to disclose a short sale situation. Will it become apparent at some point in the transaction? Absolutely, and it may derail the transaction, if the buyer was not aware of this fact prior to making an offer.
What about a seller who has a pre-payment penalty that was not discovered until closing. If the listing agent didn’t gather enough information when they took the listing to determine if the seller has a pre-payment penalty clause in their mortgage, the deal can go south when the seller doesn’t have enough proceeds to cover the penalty.
Just a few years ago agents were focused on the buyer being able to obtain a mortgage in order to close a sale. Nowadays, the sellers also are scrutinized to make sure they have enough proceeds to be able to close.
Using a competent Raleigh real estate broker who understands all these intricacies will have you a lot of heartache as you proceed to a closing.