A year ago, many even experienced real estate professionals had no idea what a short sale was, but times have changed for sure! As we navigate our way through the troubled waters of today’s economic challenges, we’re learning fast about all kinds of new things, including the ubiquitous “short sale” option. As you know, a short sale is a deal where the lender(s) holding the mortgage on a property agree to consider offers less than what is owed. Having worked with several of these situations in the last few months, here are some other things to consider about short sales:
• Furnishings , appliances and fixtures are considered “personal property” and are not a part of the mortgage on the property. They remain the property of the owner, and can be removed from the home unless other arrangements are made. Typically, an addendum to the contract is made for a separate purchase of the personal property (sometimes for $1), and this list should be itemized. This is especially important in an market such as ours in the Gatlinburg area, because many investment properties are sold “furnished”.
• The listed “price” may not be the price at all….depending on where in the process of negotiation with the bank the deal is, the “price” on the MLS could be the original list price of the property, the amount that the owner needs to get to cover his debt and closing, or the price that the bank has already agreed to accept. This sometimes takes some research to determine!
• The bank is in control! Unlike normal negotiations where sellers and buyers are the principals, in a short sale it is the lender’s decisions and opinions that matter. Sometimes owners will be working directly with their lender, sometimes the Realtor will be.
• At any time during the negotiation of a short sale, even if there is a signed contract, the property may go into foreclosure. Once this occurs, the signed contract may be voided, and the property may go into a kind of “limbo” state –where pretty much nothing can happen for a while. This is very frustrating when there are buyers ready to buy and sellers ready to sell.
• Short sales can take a long time. Depending on the lender, responses can take weeks and weeks. One way to shorten this is to look for properties where the lender has already agreed to a price it will accept.
• Short sales are not for the faint of heart! Although there are tremendous deals to be had in this arena, some buyers do not want the excessive time frame and hassles involved in negotiating the deal. While many of the tasks associated with this fall to the real estate professional, it still is a major investment of time and sometimes tied-up deposit money that is not attractive to everyone. And remember, this is a fluid situation—things can change rapidly from minute to minute, so patience is required!
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