Short Sales

The majority of properties on the market these days are either Short Sales or Foreclosures.

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the home owner. The home owner sells their property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, most often not in full satisfaction of the debt. In such instances, the lender has the right to approve or disapprove of a proposed sale. A proven hardship by the home owner must be demonstrated and based on that hardship the bank will either approve or deny the home owner permission to do a short sale.

A short sale typically is done to prevent a foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing, but at any time during the foreclosure process the bank/s can withdraw from the proceedings.

When such a property gets listed it must be declared that it is a short sale. The sale of the property then must be approved by the bank.

What that means is this: A buyer puts in an offer for the property, that offer (or offers) is/are submitted to the bank for their approval. This approval takes anywhere from 60 to 90 days at least for an approval.

Some Realtors only submit one offer, others submit a multiple offers. And keep submitting offers to the bank during the 60 – 90 day period. That means that you may never know if your offer is the best and highest or whether it will be accepted or rejected by the bank until the end of this 60 - 90 day period.

So let’s say that it is approved and you are the successful bidder. There will be certain conditions that the bank will want, may be even a price adjustment (up) and other things, and if all of that is agreed then you open escrow. In most cases, you’ll receive the property 100% “as is”.

There can be many complications that can come up which would not be applicable to a normal sale. E.g. if there is something wrong with the house, the bank will not fix it. It is yours to fix. This may also apply to any termite work that needs to be done and several items MUST be done before the bank will fund the loan.

A lot of people who put in a bid for a short sale and then continue looking and if they find something, then they will back out of the short sale if and when they find something.

So my question to you is: Are you up for a short sale?

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