January 3rd, 2011 11:04 PM by Wendy Thomas
There are a lot of details that are involved in short sales. I hear a lot of questions from buyers as well as sellers. So first things first:
1. What is a short sale? For a seller, a short sale means that their lender will allow the seller to sell their house for less than the seller owes on the house. This is a better situation for a seller than a foreclosure, as far as the effects on the sellers' credit.
2. How is buying a short sale different than buying a foreclosure? The short sale is still owned by the homeowner, where a foreclosure is owned by a bank. If you make an offer on a short sale, the homeowner is allowed to negotiate the offer with you, the buyer. But once the offer is agreed upon, the owner's lender must approve the contract. That is the part that causes the most trouble, as it can take up to 6 or 8 weeks (although it's sometimes as little as 4 weeks). Keep in mind that each case is different, each lender is different, and you never know how long it will take! When buying a foreclosure, the Realtor will submit your offer directly to the bank (as the seller), and although it may take a while to come to an agreement, you can start working towards closing once you have a completely signed contract with the bank.
3. As a seller, why would I need to sell my house as a short sale? If you are having trouble making your payments, or are unable to continue to pay your mortgage, the most important part of this is to make sure that you go through the proper steps with your lender--- this will include finding the appropriate party to talk to within your lender and completing the right paperwork, etc. It will save you a lot of headache in the end. I'm a Realtor, not an accountant or an attorney, and if this is a direction that you consider going in, you will want to talk with one or both, regarding the consequences for you.
4. Why should I buy a short sale? Depending on the circumstance, you may be able to buy a house for reasonably less than you would otherwise. In this market, it appears that our prices have stabilized, but yes-- prices have gone down over the last couple of years. That has put a lot of sellers in difficult positions of owing more than their houses are worth, which opens them up to the possibility of a short sale.
I have a lot of information regarding short sales and foreclosures, and I'll be happy to send it to you upon request. Just let me know!
My biggest piece of advice for buyers regarding short sales-- if you are a buyer who HAS to be out of the place you are in now (whether renting or selling it), by a certain time or HAS to close by a certain day, then don't look at short sales. The time frame between contract and closing is the biggest unknown, and you have to go into the offer prepared for that.