One of the first questions that I am asked by first time home buyers in my area (Macomb County MI) is "What does it mean when I see subject to Short Sale on the listing?"   I always send along this informational sheet that I typed up late last year, and now am counseling first time home buyers to take into consideration the risk to them of missing the deadline for the 1st time home buyers tax credit.  (You must have closed on your new home on or before November 30th of this year in order to qualify.)

Many first time home buyers are purchasing homes in the Metro Detroit area right now because of this generous tax credit (up to 10% of the purchase price) and will not want to take the chance of waiting for a short sale to be approved (or, disapproved) and miss the deadline for the tax credit.

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    You've noticed the phrase "Short Sale" in the listing information - what is that and now what?

A home owner puts his home on the market for less than what they owe on their mortgage (or 2 mortgages, or 3 mortgages.)

The sellers real estate agent and the seller then put together a package for the lender (and 2nd lender, and third lender if applicable) to explain the hardship that the seller is facing, the falling property values in the area and the seller also sends along all of their financial information. (Think of this as the documentation for applying for a mortgage, but with reverse intentions)

A home buyer hears about the house for sale that is priced attractively and makes an appointment with his buyers agent to view the home. Home buyer then decides to make an offer on the home. Seller accepts the offer and the purchase agreement is forwarded over to the lender (and 2nd lender, and 3rd lender, if applicable)

Home buyer and the buyers agent wait. The first week goes by and everyone is still patient because of course they've been told to expect this wait. The 2nd week goes by and still everyone is displaying patience. On to week 3 and the buyers agent has been calling the sellers agent asking if there is any news, and has the package(s) that has been submitted to the lender(s) been reviewed? The sellers agent states "Have patience". Week 4 comes around and perhaps the package has been reviewed by someone with authority to do so at the first lender. (I'll stop mentioning lender #2 and #3. You get the idea by now.)

Weeks 5-8 the lender orders a BPO. (Brokers price opinion, meaning that the lender, normally in another state, wants to make darn sure that the house is really worth what the seller, the sellers agent, the buyer and the buyers agent in this local area feel it is worth.)

The lender(s) decides one of two things: That the house is worth what the purchase offer indicates, or that the house is worth more than what is being offered for the home.

Guess what happens if they decide it is worth more? Google "short sales" and you'll have so much to read that your eyes will hurt.

Did I forget to mention the fact that some of these transactions don't allow seller paid concessions to the buyer? Did I also forget to mention that while the buyer is waiting for a response that the interest rate they were quoted upon mortgage application has probably now expired?

**Purchasing a short sale can be a good thing for the patient buyer and the seller. Always ask upfront what the expected time table is, and be aware of the challenges and changes that can take place during the process.**


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Please ask your buyers agent (you do have one, don't you?) to explain the risks to you if you (and your tax credit) wait for months for a reply on a short sale offer.

                               Kris Wales - Representing home buyers in Macomb County MI

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