The Washington Post/ istockphoto - Short sales can help sellers who owe more than property is worth.
By early July, instead of celebrating their 34th wedding anniversary, Joseph and Mary Damiani were dealing with hyper stress and a headache-producing pile of paperwork. That’s about all they had to show for eight months of struggling to sell their underwater four-bedroom Colonial in Locust Grove, Va.
And that’s after they agreed on a sales price with a prospective buyer.
Short sales in the Washington area.
The good news is that the potential purchaser has been extraordinarily patient. “This house exceeded my expectations,” said Tom Depew, 31, who is single and lives in McLean. “Nothing is pushing me against the wall, so I can wait it out.”
The holdout: the Damianis’ two lenders, which the couple says have been putting them through a grinder as they seek a short sale that would allow Depew to buy the property for $100,000 less than what they owe on it. The Damianis are hoping the lenders will view the deal as beneficial to their institutions by helping the couple avoid joining the many underwater owners who have walked away from their properties.
“Get ready to bare your soul,” Joseph Damiani said as a warning to other underwater sellers considering short sales.
In the Washington area, with Zillow reporting that nearly one-third of properties are underwater, short-sale activity is picking up. Short sales in pending status rose 23.9 percent from June 2011 to June 2012, according to RealEstate Business Intelligence. Completed short sales rose by 16.8 percent during that same time, according to RBI.
Without question, experts say, short sales are the most complicated real estate transactions a homeowner can face — and the most prone to failure. The failure rate for short sales locally is 49.4 percent, compared with 17.9 percent for foreclosures and 13.1 percent for traditional sales.
By going through a short sale, though, sellers can avoid having to come up with thousands of dollars at the closing to make up the difference between what they owe the lender and what a buyer would be willing to pay.
Central to being approved for a short sale is the seller’s “hardship statement” filed with the lender proving an inability to repay the loan. The loss of a job, death of the family breadwinner, military deployment, divorce, job relocation or illness and its resulting medical bills would be among legitimate reasons.
Once that hurdle is crossed and permission is given to proceed with the short sale, an intricate web of negotiation begins. The seller must find a buyer, agree on a price, then wait and wait some more for the lender, which can either accept the buyer’s offer, reject it or counter it. The process can be even more cumbersome when more than one lender is involved.
$100,000 drop
When a job transfer brought the Damianis to Virginia from North Carolina seven years ago, they bought a four-bedroom, two-bathroom Colonial for $389,000. Built in 2005, the house, located in Lake of the Woods — a water-oriented community 17 miles west of Fredericksburg — is in pristine condition and one block from the community’s golf course.
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