A Client of mind just emailed me and asked me to explain a short sale. I thought I would explain it here on the blog.
Basically the seller of a home owes more than what the house is worth. Maybe they bought the home recently at the height of the market or refinanced too many times and no longer have equity. Then the seller has a financial hardship, perhaps a job loss or illness, and can no longer keep the home. The short sale is a way to avoid foreclosure and sell their house without damaging their credit as badly as going though a foreclosure. The seller negotiates with the bank for the bank to take less money than what they owe.
The problem with the short sale is that so many people are in this situation and the banks are overwhelmed. It takes an average of 90 to 120 days to hear back if you offer is accepted. Plus the short sales are usually sold in as-is condition so even if the bank approves the sale you may run into a problem with the home inspection. Also many banks are now doing a loan modification instead of a short sale. So as a buyer you could be waiting for months only to find out that the bank will not approve the sale.
For my buyer clients I usually recommend avoiding Short Sales unless you are willing to wait a very long time and face disappointment if the deal does not go through.
P.S. If you have any questions about short sales or any other real estate question please contact me or call me at 609-484-9890 ext. 132.