Can anyone tell me more about short-sale homes?

Re: Can anyone tell me more about short-sale homes?

Short sales are homes for sale where the seller owes more on their mortgage than the home can be sold for in today's market. In other words, the seller may owe the bank $400K, but the house has a fair market value of around $350K. So when the house sells, the seller will be short approximately $50K in repaying the bank. In order for the sale to take place, the bank must agree to take less than what is owed.

The bank will not agree to a short sale until there is a buyer and the house is under contract (pending bank approval). Only then will the bank review the file and determine whether or not the short sale can proceed. The bank may decide that they want more money (even if the seller alredy agreed to the price) or that the seller doesn't qualify for a short sale. Therefore, a buyer of a short sale has to deal with the uncertainty of waiting for bank approval and also the time lag ... it can take awhile to get bank approval, so the timeline of a short sale is longer than a traditional sale.

In the past, there was a perception that short sales were always "great deals" for buyers. But these days, banks are more careful about making sure they are getting as close to fair market value as possible for short sale homes (to minimize the shortfall as much as possible). Also, a short sale is typically "as is" because the bank doesn't want to spend any money (since it's already losing money) to fix things that you can normally ask a seller to fix. Also, if the house has been abandoned, a short sale may not be in habitable condition, and you may need to get a rehab loan instead of a traditional mortgage.

How smoothly a short sale goes depends on a variety of factors -- how cooperative the seller is (because the seller must provide a lot of financial info to the bank and show that they've suffered a hardship and can't pay the mortgage in order for them to qualify for a short sale), how knowledgeable the realtors and the attorneys involved are, and what banks (and how many banks) are involved.

If you have specific questions, feel free to FM. I am a certified short sale professional and am happy to help!

Re: Can anyone tell me more about short-sale homes?

We bought a short sale. What would you like to know?

Re: Can anyone tell me more about short-sale homes?

Re: Can anyone tell me more about short-sale homes?

i also purchased a short sale 3 1/2 years ago. It can really work out very well for the buyer-you just have to have patience! The beginning process was the same...

Went to look at the house w/the Realtor; all that good stuff. Once we decided we liked it we put an offer on it. It’s not like putting an offer on a regular sale. You’re dealing with the bank. You’re basically a file on someones desk with no attachment to the property. We waited about 2-3 months for an answer! Luckily for us it worked out; got the inspection; then went to closing all in about 30 days after that.

The main difference on a short sale and why you end up getting a great deal. Is that the bank that owns the mortgage decides to sell the house below what the amount that is left on the mortgage.

I think the biggest downside to the short sale process is the waiting. And you probably won’t be able to negotiate certain things (like seller paying part of closing costs) and usually the house is being sold as is.

We had a lot of cleaning to do afterward; the owners emptied out the house; but left EVERYTHING on the front grass!! They weren't really happy about leaving; i think they were about to foreclose. We had to sort (paper/glass/garbage) and put the garbage out the next day for pick up! Other than other electrical updating and changes to make the home more our taste it was move in ready.

ETA: after reading the post from C21 above; perhaps now a days you won't get as good of a deal w/the short sale as we were 4 years ago?

Message edited 10/26/2011 2:35:47 PM.