The term “Short-Sale” is used when the proceeds from the sale of a property are less than the combined outstanding loan balances on the property.

Today, in Key West & the Lower Keys, the market is down 30%-70% (depending on the neighborhood) from the market high in early 2005. Let’s look at the following example:

An owner purchased his/her property four years ago for $500k and put 20% down. Therefore, the person who bought the home made a down payment of $100k and has a mortgage of $400k. However, in today’s market, the home may be currently worth only $300k. If the person were to sell the property today, after selling expenses (assume selling expenses are 6%), the net proceeds would be approximately $282k, or about $118k “short” of what is needed to pay off the mortgage. Hence, the term… “Short-Sale”).

When making an offer on a property that is listed as a “Short-Sale”, the decision maker is the Lender (or investor) who holds the mortgage on the property, not the property owner. Therefore, potential Buyers need to understand that when dealing with large institutional lenders, they need to be very patient. “Short-Sale” contracts typically take 3-6 months (or longer) to be approved by the Lender.

Also, not all offers on “Short-Sale Listings” are accepted or approved by the lender (nationwide, the average for successfully closing on a “Short-Sale” listed property is well under 50%). If the Lender doesn’t receive an offer close to the “Appraised Value” of the property, they will often just foreclose on the property rather than give it away to someone making an unrealistic “low-ball” offer.