Episode Summary:
Overview of Episode 89
Short sales are rising across the country. Sacramento leads with a 142% increase in listings. Other states follow with 25–60% gains.
Investors are returning to the strategy as equity tightens and credit conditions shift.
Rebecca Ravera, who has completed over 1,000 short sales, breaks down what’s really happening behind the scenes.
How a Short Sale Works Today
Rebecca handles both listing and negotiation—but through separate companies. Maryland law requires this separation to avoid conflicts.
Most short sale leads come from real estate investors. They often discover a property is underwater only after pulling title.
When the investor can’t close, Rebecca still works with the seller to avoid foreclosure and relist the home.
HUD Changes and Lending Reactions
Jack and Craig discuss a proposed HUD budget overhaul. It could turn federal housing vouchers into state-administered block grants.
While most experts don’t expect it to pass, the political noise is already influencing lenders.
Some DSCR loan buyers now avoid properties with Section 8 tenants, citing perceived risk.
The Short Sale Process: What to Expect
Short sale documentation is still a beast. Each servicer has its own requirements, and some still demand faxes and wet signatures.
Typically, once an investor submits an offer and financials are complete, the bank orders an appraisal.
If the offer matches the appraised value and guidelines, the short sale moves forward. If not, the buyer can exit.
Appraisals Still Dictate the Deal
Appraisals can make or break a short sale. FHA, VA, and Fannie Mae all have different thresholds.
Some allow 84% of appraised value, others require 100%. Reverse mortgages are even trickier.
One property appraised at $425,000 with one servicer, then $300,000 after a switch. The spread can be that dramatic.
Who Says Yes to a Short Sale?
Government-backed loans are more predictable. Private investors are tougher—they often demand unrealistic payoffs or reject offers entirely.
Interestingly, more approvals come in at quarter’s end, likely due to internal bank pressure.
If you’re timing a submission, that’s something to consider.
Timelines Are Faster Than Before
Rebecca’s team typically closes short sales in three to four months. The longest ones now run about nine.
They call banks constantly—sometimes three or four times a week. That persistence pays off in faster approvals.
Deals Are Coming Back to the MLS
With amateur investors exiting, seasoned investors are finding more short sale deals on the MLS.
Many homes listed as standard sales later become short sales when title issues emerge.
Rebecca encourages investors to get in early. Even if the deal doesn’t close, others may step in once approved.
Partial Claims and Reverse Mortgages
COVID-era loan modifications left many owners with hidden second mortgages.
These partial claims often surprise sellers at closing, when title reveals the full debt load.
Reverse mortgage short sales are also rising. Their structure leaves many borrowers underwater from day one.
Are Short Sales Still Profitable?
Yes, but margins vary. It all depends on the appraisal and how the lender calculates net proceeds.
Some deals are singles, others are home runs. It comes down to timing, paperwork, and appraiser accuracy.
If the numbers don’t work, the investor can walk away with no penalty.
What Sellers Need to Know
Deficiency judgments are rarely pursued, especially on government-backed loans.
Still, sellers should talk to a tax advisor. The Mortgage Forgiveness Debt Relief Act shields many from tax bills—but not all.
Short sales are far better for credit than foreclosure or bankruptcy.
