Short sales are properties that are in danger of foreclosure and the owners need to sell for less than the current mortgage. Many properties are underwater or upside down with their mortgage being higher than the property’s value, so a short sale is a great option for a seller, but only if the bank agrees to take less money that what they are owed on the mortgage.
Sometimes, short sales fall through and a lot of time gets wasted on a property that will never close. Short sales fail because the seller doesn’t meet the lender’s short sale criteria, the seller/lender package is lacking information or not current or the listing agent cannot find a balance point for a fair market value with the bank’s representative. Another reason short sales fail to close is that more liens may be uncovered, such as a HELOC or secondary mortgage, adding another layer of complexity to the situation.
As a Realtor, I’ve never understood why a bank would rather allow a property to go into foreclosure rather than cutting their losses quickly and moving on. Holding vacant property, paying the taxes on it, listing it with an agent, and paying agent commissions when it finally sold, would add up quickly to decrease the potential profit margin of keeping a property on the books.
But I digress.
If you are ready to make an offer an a short sale property, have your Buyer’s Agent ask the listing agent these questions first:
Have you submitted the short sale lender package?
Has the lender received a BPO/Appraisal?
Have the property owners gone into default?
Has fair market value been determined (better yet, is it reflected in listing price?)
How long does it take from start to closing?
How has your experience been with this particular bank? Are you familiar with their processes?
Have you done a preliminary title search?
Are there other liens against the property, and if so, have those lien holders agreed to the short sale?
Now, if after answering all these questions, you’d still like to make an offer that is lower than asking price, I suggest you and your Buyer’s Agent sit down and review comparables. If you can find at least 4 or 5 that are significantly lower than asking price, you may be able to make a case to the short sale lender for the lesser amount.
Lastly, remember, short sales are never quick or painless. The bank is not the same as dealing with a distressed homeowner, who may just want out of a mortgage. A bank may use complicated matrixes that automatically lower list prices or run a program based on number of weeks until a foreclosure date to change a listing price. Working against a matrix is a lot different than working with a property owner. If you have the time and patience to outlast a bank, you may win a sweet deal on a property in the end.
Want to find out more? www.rismedia.com has a great article on Real Estate Education by George Gee Dunsten.
Want to find out why all real estate is local? Contact me at Jennifer@ElginFoxValley.com.