Selling a Home in Metro-Detroit - Who Profits from Short Sales?

If a homeowner owes more to their lender than the home is worth, the situation can seem pretty bleak - fortunately it’s not as rough as it sounds.  A short sale is a possible way to negotiate with the lender for a solution that helps everyone out.

The process involves the seller or an agent selling the home to a buyer at market value, or a bit below market value.  The lender agrees to accept the proceeds as payment in full on the mortgage - even if the sale price is actually less than what is currently owed on the property.

The major downside is that a lender is not required to negotiate or accept a discounted payoff, so there is no guarantee that your lender will let you pursue a short sale.

When Short Sales Process - Who Profits?

When you sell a home in Metro-Detroit, the ideal situation is to get more than what you paid into that property over the years.  Unfortunately, with a short sale, the seller isn’t making any direct profit.  So who actually wins?

The Current Lender

The bank or lender will profit to a certain extent because they don’t have to invest time and money in foreclosure, carrying the asset on their books, or attempting to sell the home in Metro-Detroit.  Zero money is paid out marketing for a new homebuyer.

Listing and Buying Agents

Listing and Buying agents typically earn a commission when a home sells.  In a short sale, the lender may require/insist that they take a fee reduction.  Even if the fee is reduced, the agents and brokers involved still get paid for getting the property sold.

Title Companies

When there is a new buyer, a title company will issue a title policy in favor of the new buyer and an ALTA policy for the new lender.  Payment takes places for this service.

Escrow Companies

If an escrow company is utilized as a third party for the transaction of selling a home in Metro-Detroit, they receive payment for their services.  The costs are typically handled by the lender or divided between the new lender and the buyer.

Other agencies and individuals could profit as well including Appraisers, county tax assessor, insurance companies, the new lender, a Michigan mortgage lender, the IRS - a variety of parties are involved in the entire process of closing on a home that is for sale in Metro-Detroit.

That doesn’t mean the original owner of the home who sought out a short-sale doesn’t gain in the end.  While there may not be a monetary gain, they are able to walk away from an underwater mortgage free and clear without taking a significant hit to their credit.  The only exception is that if a seller is more than 59 days behind I payments, the short sale could have virtually the same impact on their FICO as a foreclosure.

If you’re considering selling a home in Metro-Detroit because of mortgage difficulties, and you’re curious about the short sale process, act now.  Call us today to discuss your options and we can help you get your home sold fast.