Everywhere you look in the Metro area, there are likely to be some great bargains. Some of those bargains may be “short sales” – properties where the homeowner owes more to the bank than the property can sell for right now (you may have heard the term “upside down” or “underwater”). So the seller is asking the bank to let them out from under and, in many instances, forgive the difference. A short sale can be a good deal, but here are some information to help you decide if a short sale is for you, and what you can expect:
Short Sales Take Patience. When a seller needs to sell and realizes they are short, they submit a request to the bank for a short sale to start the process. Here’s the kicker: The vast majority of the time, the banks will not discuss with the owner how much they are willing to settle for at that time. The bank will only start to give hard numbers when they have an offer to review. So the agent and the seller price the property where they think it will sell, and hope the bank will eventually say yes. When an offer comes in, it is packaged with the seller’s information and the package goes to a clerk to put at the bottom of a stack of hundreds, waiting for its turn. If the package is incomplete, the agent is eventually notified, and the file goes back to the bottom. It is an arduous process just to get to the decision maker in the bank, who is also wading through a stack of files. And there may be more than one bank involved – they both need to agree to allow the sale.
Getting Approval is One Thing – Going to Settlement is Another. So you waited it out, and the bank said yes to your offer and is allowing the seller to proceed. Now the title work is done to make sure that you are buying a property with nothing owed on it by the previous owner. If other liens (debts) show up, they will keep you from settling on the property until an agreement can be made as to how those will be satisfied. If they can’t be satisfied, the seller can’t sell.
Don’t Fall In Love. With the house, that is. Know that the short sale offer may be rejected after a long wait. Know that there may be other problems that arise. Keep your mind and your options open. Continue to look for houses that suit your needs. Depending on where you are on the offer/contract phases of the initial short sale, you should be able to cancel your offer or contract if the bank has not made a decision. Make sure you understand the terms under which you can cancel, and discuss with your agent how best to protect your interests in the situation.
Bottom line, if you are not in a rush to move, and can stomach the wait, a short sale may ultimately be a good deal for you. Your patience may be rewarded by getting a property with tremendous built in equity. You simply have to know what you’re up against, expect the worst but be prepared to move forward if you are one of the lucky ones who gets a faster response.