I frequently receive this statement immediately followed by the question – “What is a Short Sale?”
The following is a response I sent to a client just the other day.
A “short sale” means the seller owes more on the property than it’s worth and they are usually behind on their payments. The listing agent lists the home at a price that will cause it to sell. Usually it’s at a price below market value to bring attention. Since the final sales price is subject to bank approval, they can “list” it for whatever they wish. Once they receive offers, they submit those to the bank requesting the bank to release title for the amount offered. The bank goes through their own evaluation process and approves an amount they are willing to sell it for. In other words, short sales don’t always sell for what they are advertised for.
Since the short sale system is now 5x its capacity, it usually takes a minimum of 8 weeks to receive a response from the bank. In the case of my last short sale transaction, the bank foreclosed on the property before they would approve any of the offers submitted. That was after waiting 5 months for a response. So it can be a very frustrating experience if expectations are not realistic.
In my opinion, the banks are not receiving enough incentive to work these out for the benefit of the owner and buyer. They might be delaying writing the losses off from foreclosure and waiting to receive foreclosure insurance proceeds from FHA or PMI entities.
As with any transaction, the end result usually comes down the experience of the agents involved. Make sure your agent asks the listing agent lots of questions. Questions such as: How many short sales have you handled?, How many have you been successful in?, Can you send me a copy of the packet you present to the bank?, What communications have you already had with the bank?, Have you ever worked with this bank in the past and if so how did it go?, etc. The answers from questions like these will help you determine the likelihood of the transaction closing successfully.
What I typically recommend to a client who falls in love with a short sale home is to put in an offer for their highest value and keep looking. Since you are open to other buyers putting in other offers, it’s usually ideal to put your best foot forward and then keep looking for other options.
Does this help clear it up for you?
Charlie
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Charlie Pitkin
Outlaw Real Estate Group
Partner | Consultant
512-514-0302
Charlie@AustinRealEstateIQ.com
www.OutlawRealEstateGroup.com
