The Risks of A Short Sale

Real Estate Sales Representative with Fieldstone Real Estate

For a seller, a short sale is a success! It means you were able to sell your home and amicably negotiate a resolution with your lender, which may have included full or partial debt forgiveness, and other benefits.
The largest risk for a seller is being taken advantage of in a mortgage assistance scam. However, it is very possible to attempt a short sale and completely avoid that risk. For those sellers, the only risk is that the sale won't go through, and the property will be lost to foreclosure. That is a big risk, but for most sellers, BEFORE they start the short sale process they realize this is where they are headed unless they can intervene.

For buyers, there is significant risk.
* How much time will you lose? As a buyer, you don't really know how long it will take for the seller's lender to approve the sale; or worse, NOT approve the sale. If there is only one loan, we're seeing 6-8 weeks as the normal time frame for approval now. This is WAY down from 6-8 MONTHS a year ago.
* How will you compete with other buyers? I see listing agents who advise their sellers not to ratify an offer at all until the lender approves one. Some listing agents submit offer after offer to the lender without even responding to buyers to acknowledge the offer. I have seen listing agents who advise their sellers to ratify multiple offers as primary contracts - with the caveat of the 3rd party approval requirement. Their theory? The lender will only approve one contract. So, MANY buyers, an infinite number of them, may be sitting, waiting months to learn that their offer was accepted, or may never get a response at all.
* The lenders control the clock. Once approved, they expect you to settle quickly - usually in less than 30 days. If you can't, you must have the sale "re approved".
* Sellers disappear! Sellers have very little to lose and often feel hopeless about the situation - especially if it doesn't appear that the bank will be approving the sale. Believe it or not, we're seeing cases where the bank approves the short sale, and the sellers are no where to be found... and the sale can not be completed without the seller. In both cases, if the buyers deposit is in escrow, it is difficult to get it back. There's a process, but it is time consuming and frustrating.

These and many other situations are commonplace in todays market. In fact, they are quickly becoming the most frequent type of transaction in the Dulles region (Fairfax/Loudoun County). And, keep in mind that short sales are realitively new to the marketplace, and many agents are still extremely unfamiliar with the process. So, before entering this market, make sure your agent knows the market and all the various Types of Sales Seen in Today's Market.
A buyers agent's advice about how to structure an offer should vary dramatically for a short sale or an REO. Ask your agent about the differences.


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Vicky Chrisner

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