Short Sales

 Many buyers these days ask me if they should consider looking at distressed properties.  One in that category of properties is short sales.  I am often asked what they are.  It is not so much what they are but how you process through one … 

A short sale generally happens when a seller finds themselves in a position of "we have to sell".  It can be due to divorce, relocation, or other reasons.  With the reality of declining markets many sellers find themselves in a position do to true market conditions that they simply owe more than what their home is worth.  When this happens they find themselves negotiating with their mortgage holder or bank to see if they will take less than what the home is worth. 

Say someone bought a home for $200,000 and they owe $180,000 on it and they want to sell it.  So they talk to a realtor who does the research to see what there home is worth.  The realtor finds that after extensive research homes selling in the current market are selling for $160,000 to $175,000.  At this point the seller who still owes $180,000 is either going to have to see if they can sell the home and net  $180,000 or more times than not see if the mortgage holder will except less than what they owe.  When this happens you have a short sale.

Now comes’ the buyer who is looking for a deal and what a deal they can get, sometimes.  This type of transaction is not for everybody.  It can take an extraordinary amount of time to process through.  First an offer is made by the buyer.  The offer then has to be accepted by the seller with the caveat that the mortgage holder must also agree to what the seller has accepted.  This can take the mortgage holder sometimes a month sometimes three months, six months or longer to decide.  The kicker is you never know at the end of that long wait if the mortgage holder will agree to the offer.  It can be rejected after waiting all of that time and the buyer is left back at square one. 

This is why in many cases buyers are disenchanted with that so called “great deal” and they decide to look elsewhere for an opportunity.  If you are one who can wait out the decision making time it takes to hopefully end up with a good deal well, good for you!  Bottom line is you should know what you are getting into so you can make an educated decision.  There is one other thing. Some sellers don’t always disclose that their property is a short sale until an offer comes in.  Again, when it is disclosed you should clearly understand what the process is so you can decide if this type of situation is right for you.  If you are one looking to meet the deadline for that $8,000 tax credit well, you decide.