Short Sales

They are coming out of the woodwork!

 

One of the biggest buzzwords in real estate recently is “Short sale”

After listening to some late night infomercial about how to make a killing in the real estate market, many buyers (and sellers) have asked me about buying or selling a short sale.

It only takes a few minutes to give them enough information to see if they really want to pursue that option. Usually, they do not.

 

In the most basic terms, a short sale is when the lender agrees to accept less than what is owed to them, from the proceeds of a sale. This usually occurs because the market value of the property has fallen to a level below what is owed on the property; Something that is happening more and more around the country. Unless a homeowner MUST sell, for whatever reason, then the best thing to do is to HOLD ON.

For the sellers side, doing a short sale makes no more sense than a foreclosure.

The effect on your credit is virtually the same.

The lender is not going to just give away their money to do a short sale if they think they can do better by foreclosing and selling the property, either at the courthouse steps or by listing as an REO sale.

There is no guarantee that they will not go after the seller for the balance of the loan, even if they agree to a short sale, and if they do forgive the whole debt, then Uncle Sam could come after you for taxes owed on the amount forgiven.

 

From the buyers standpoint, the hoops that you have to jump through to purchase a short sale are many.

I have seen a few listings called a “short sale” when in fact the lender has not agreed to any such thing. Some unwitting or uninformed agent may just be trolling for an offer, in hopes of getting something the lender will accept. So potential buyers may make an offer, only to see it sit on a desk of the wrong department for weeks or even months waiting for an approval.

The lenders seem to want to make sure that if they are losing money, then everyone else must suffer as well. They will usually refuse to offer any information or disclosures about the home. If a home inspection reveals deficiencies, the lender will most likely refuse to repair and offer “as is” terms.

 

There are some who have been successful in purchasing “short sales” but for most, the process is long, drawn out, and frustrating to the seller, buyer and agent.