Navigating through short sale confusion.
Quite unexpectedly, you find a home that you both love and one that is priced $20,000 under your budget. Giving each other a “this is the one!” glance, neither one of you can hold back on your enthusiasm, feelings that are quickly tempered by your agent who states, “By the way, this house is a short sale.”
“Short sale” is a word that may be feared more than “foreclosure” for today’s home shoppers. With a foreclosure, the home is in the bank’s hands and is ready for resale. With a short sale, the home is still in the owner’s hand, with the bank standing in the way of a possible approval.
Low Prices
Short sales are enticing for one big reason – low prices. Owners, desperate to get out from underneath a loan they can no longer afford to pay, may set the home below market value to help it move. Trouble is, if the bank doesn’t like that price, it stands to lose thousands of dollars in any sale. If the bank isn’t receptive to your deal, then your home buying dreams may soon fizzle.
With a short sale, you do what any home buyer does. If you like the home, you present an offer through your agent who will then extend that offer to the buyer through his agent. If the seller accepts, you’re not done – the bank will have to review the sale and decide whether to let it go at a loss. This process can take weeks, if not many months, and may depend largely on local market conditions.
Market Conditions
For example, if the housing market is fairly strong, with homes bought and sold fairly regularly, the bank may be cool to the idea of a discounted house. However, if the neighborhood has homes that have been lanquishing on the market for months, maybe a year or longer, then the bank may accept your offer provided that it is a strong one.
One possible way to help the process move forward faster is by offering to pay slightly above the seller’s asking price and foregoing special requests such as splitting closing costs and asking that certain problems be repaired first. Having an approval letter from your mortgage broker may also help your case. Still, unless you know someone who works in the inner bowels of the bank’s mortgage department, you may find the short sale process to be a big mystery.
Buyer Patience
What every buyer of a short sale needs are two things: patience and the intestinal fortitude to survive a possible rejection by the bank, missing out on opportunities to buy other homes that don’t come with the baggage of a short sale. Short sales can yield big savings, but they often fail and take long to complete.
See Also – Why Short Sales Take So Long (And Often Fail)
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