Short Sales. What are they?
Well, many of you have heard this term thrown around the Idaho real estate industry and probably have your own idea of what it means. When my clients ask me about short sales, they, almost 100% of the time, think that it means the sale of a home will go fast. Ironically, this couldn't be farther from the truth. Short sales actually takes much longer to close escrow, usually a minimum of 60 days, but more likely 90-120 days.
The term "short sale" is used in the real estate industry to refer to the sale of a property where the balance owed to the bank is more than what the home can sell for.
In these sales, one must get approval from the bank to sell it for less than what is owed (hence, short) and the bank agrees to take the loss (short).
Short sales very long process taking 30- 120 days just to get an answer from the bank as to if they will agree to sell at a price that has been offered by a home buyer. Many or most of these homes are listed by a Realtor in their MLS databases and are not guaranteed to be accepted by the bank at the list price.
So once a buyer comes along and makes an offer, this is when the fun begins (the process starts). Most banks will not even consider if they will take a loss until the property is listed and has an offer to purchase presented to them. At this point there is a long process of going through several customer service reps at the bank until the file is assigned to one of their "negotiators" or "mitigators". This part usually takes 3-6 weeks. If the Realtor has done a good job, they usually have the prep work completed before an offer comes in, this being a financial analysis and "hardship letter" from the owners. If not, add another 2-3 weeks to the already long process.
Once assigned to a mitigator, the bank will order an appraisal or a BPO (broker's price opinion) to see what the property is really worth. Once received by the bank, the negotiator will accept or counter the offer on the table. This part of the process takes another 3-6 weeks.
And, as if this isn't long or complicated enough, sometimes there is a 2nd mortgage on the home and this same long process has to happen twice...once with the first mortgage, once with the 2nd. And both banks have to agree on the offer, sometimes competing with one another on how much loss each will take, with the Realtor being the go-between, trying to get them to agree. Wow, this is when Short sales really get fun!
I know this seems like an unusually long time, but keep in mind that these Mitigators only make about $25000-$30,000 a year. They sit in a cubicle all day long with a stack of short sale file requests on their desks, (as many as 300+ at any one time) and have to listen to homeowners' sad stories and Realtors continually calling and checking on the status of the file.
It's really quite a miserable job and the turnover is high. As well, it is a lot of extra work for a Realtor and requires much patience from client buyers.
Short sales can be really great buys, but my suggestion if you want to buy one...make sure you have plenty of time before you have to move, have a lot of patience and most importantly, don't get your heart set on the home because even though they have a fairly high success rate of getting accepted, many times there are competing offers bumping you out of first position. (This part is really dependent upon how the Realtor handles it.) There are some very important questions, we as Realtors, know to ask the listing Realtors to see how quickly and smoothly the process will go because, trust me when I say, not all short sales are created equal!
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