Short Sale is a type of seller. More specifically, it is a seller contingency.
Short Sale means that the property or home is worth less than what is owed on it. The Seller is asking the bank to forgive part of the debt or for an unsecured promissory note for the difference in what is owed. The home may or may not be in default (going through the foreclosure process.)
Short Sale is CURRENTLY the #1 Listing Category
Main reason people are attracted to an Short Sale purchase:
Pricing - very inexpensively priced if banks will approve for amount agreed upon between the buyer and a seller
Pitfalls of an Short Sale purchase:
- Takes a long time with NO guarantee that the lien holder will even agree to the terms.
- Deferred maintenance issues could make house a "money pit"
- Some Homes are sold "as-is" and no Seller's Real Property Disclosure (SRPD) is given. Buyers must waive their NRS CH 113 Rights
- Title issues can delay closing
- Fixtures attached to the house may not be there at COE
- Sometimes hard to view
Current Short Sale Climate & Purchase Procedures and Variations from Typical Transactions:
- Viewing homes with your buyer's agent can difficult. Sometimes these homes are listed merely to delay foreclosure. Sometimes they are occupied by tenants who don't want to show the home (even though by law they must if a 24 hour notice is given!) Just like with an REO showing, the home may have some issues with deferred maintenance and you may encounter health or physical hazards.
- Short Sales are currently receiving multiple offers due to lack of inventory. Expect the process on a beautiful home that seems to be attainable to take a while. Make sure your offer is solid and the seller understands that you are prepared to wait for this home!
- Once the sellers have accepted your offer, prepare to wait.........and wait.........and wait...........and wait........ There is nothing "short" about a short sale. What happens now is your accepted offer gets sent off for lien holder (bank) approval. Sometimes there is more than one mortgage so the seller must negotiate with all lien holders.
- Once you have an answer from the lien holders many things will happen: First, the seller must agree to the terms of the short sale. Sometimes they won't agree to the terms because the lien holder asks them to sign an unsecured promissory note for the difference or that they will not wipe out the deficiency. Many times the seller has to go back to the negotiating table with the bank.
- You may even have your price, terms or conditions countered and a very short time to act. You have to decide if you can agree with the new price, terms or conditions to proceed and you must do so quickly.
Common Problems during due diligence on an Short Sale property:
- Home Inspections: There seems to be a lot of deferred maintenance (previous owner did not do preventative maintenance on the home) so there can be plenty of structural or mechanical problems associated with the deferred maintenance
- Appraisal: Deferred maintenance issues may be flagged by an appraiser which, the lender, in turn may REQUIRE repairs to be completed prior to funding of the loan. Many times the seller in a Short Sale will not correct those defects.
!!!Final Walk Through Issues: Since the home is (more than likely being conveyed as-is) you may have to waive the walk through inspection. YOU SHOULD STILL WALK THROUGH to make sure the property is in the same condition the day you wrote the contract.
!!! Many times personal and real property disappear in a short sale. Crazy things like door knobs and light switches......keep this in mind when you purchase the property as a condition in your contract may be that the property is conveyed AS-IS and there is no recourse to go back and request those items get taken care of or reimbursed at close!