If ever there was a misnomer it would be "short sales". They are not short, and they rarely result in a sale.
Unfortunately in today's array of multiple listing inventory more than 30% of all homes listed for sale are short sales. This is tremendously misleading.
Simply put, a "short sale" is offered by a homeowner who is "underwater" on his mortgage and is hoping that his mortgage holder will forgive part of what is owning in a sale. Using simple numbers, let's say a home owner owes $200,000 and is offering his home for sale as a short sale for $125,000. He is hoping the lender is going to take a $75,000 loss and let him walk away. Huh? How often do you think that really happens? The answer is not nearly as often as the statistics want you to believe.
Houses listed in MLS as short sales are currently the largest single category and account for over 30% of all listed inventory. When an offer is received on the property it is submitted to the lender for approval. The MLS rules require the status of the transaction be listed as a pending offer. That is more illusion since the great majority of short sales offers submitted to lenders are rejected and/or countered and the house moves forward to its ultimate conclusion - a foreclosure. In the meantime the MLS reports the pending sale as a positive market momentum statistic.
A more realistic name for short sale offerings is "houses that have not yet been foreclosed upon, but soon will be".
Here is the telling of the short sale illusion. Investors make multiple offers on homes without even seeing them and hope one of them gets accepted. They have the time as they are only interested in crunching numbers. They know their offer probably won't be accepted, and they don't care about the two-three months required to find out. They have tied the property up. If you are a buyer, hoping to make the deal of the century don't mess around with short sales, unless you have a century to wait.
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