When I start showing homes to a new client, I always ask the question "Do you know what a short sale is". I typically always get the answer "Yes". They either tell me it is a quick sale or it has something to do with foreclosure. The first answer is definitely not true and the second answer, well its at least in the ball park. A short sale is when the owner of the property cannot sell the property for what they owe, but they need to sell. This means that the bank has to agree to let them sell for less than they are owed. In some cases the bank will take a loss, in other cases the seller has to take back a note to pay all or a portion of whats left. Because so much of how a short sale works depends on your specific situation and what bank you are dealing with, every one works differently. Below are some bullet points of things to know about short sales. Remember all short sales are different so some things on my list may not be the case in your situation.
- Short sales typically take a long time to process, in some cases 12 weeks to get a negotiator from the loan servicer, and a few weeks after that to get an answer.
- Just because you offer the asking price it does not mean you will definitely get approved. In most cases the asking price is set by the listing agent, not by the loan servicer. The loan servicer will get an appraisal and use that number in making their decision.
- Short sales are in many cases referreed to as Pre foreclosure. This is not always the case but in some cases this is the terminology you will hear.
- In most cases short sales will be better for your credit than a foreclosure. This mostly depends on how the loan servicer reports to the credit bureau. Typically if you sell short you will be behind on your payments and this is where much of the credit damage will be done. Once again every situation is different.
- You should always consult a real estate attorney before making the decision to sell as a short sale.
- Once you have your offer signed by the owner you have a ratified contract, with a 3rd party contingency. This means that you are under contract and cannot get out unless you are released by the seller or your contract expires. So make sure the dates you put in your offer you are comfortable waiting for.
There are a lot of great deals out there that are for sale through a short sale, but you are only the right buyer if you are willing to wait it out. Be patient it might be worth it!
Long & Foster
Note: this information is for general information only, please verify all information