I hear this in the Roanoke Virginia market every single week. Buyers call up and say that they want to look at short sales. I am assuming that this is because they have heard from a friend, family member, the news media or someone online that Short Sales are such a good deal!
I would like to clarify some things about a Short Sale in the Roanoke area:
- A Short Sale in the Roanoke Area is when a seller owes more on his or her home than it is worth and is in a situation where they have to sell.
- The seller of a short sale is still responsible for the difference between the sales price and the amount owed plus the cost of the sale.
- A Short Sale is not a get out of jail free card for the seller. The seller's credit score will be impacted, just not nearly as much as a foreclosure.
- A Short Sale is a very emotional event for a seller. (many sellers look on a short sale as a failure on their part, others look on it as a mini-foreclosure)
- Most Short Sales take MUCH LONGER To close than a traditional sale. (Rate locks can and will expire, it can take as long as 9 months to close a short sale)
- You must have two different approvals on a Short Sale Transaction. A) The seller must accept your offer B) the Lender must ALSO accept your offer (the lender is the one who drags their feet traditionally)
- Sometimes a Short Sale will be foreclosed on while waiting for lender approval. (That is the risk of buying a Short Sale, there is nothing you can do about the lost time or loss of a rate lock)
- Short Sales can be closed by competent REALTORS working with willing buyers, sellers and lenders. It happens everyday as long as ALL parties work toward one common goal.
- In the Roanoke Area, a Short Sale is typically a failure of common sense lending (there are multiple culprits for this) or poor credit decisions by some sellers. The property values in the Roanoke Area have not dropped appreciably over the last 3-4 years. (Smith Mountain Lake being the exception).
If you are interested in buying a Short Sale in the Roanoke Area, I would suggest speaking with a lender that can give you an idea of the financial risks you will take if you cannot lock a loan for several months. I would also highly suggest that you use a REALTOR (me!!) who will put language in the contract that will allow you to cancel the contract and receive a full refund of your earnest money deposit at ANY time for ANY reason up until the time that the lender approves the Short Sale. I would also encourage you to use language in the contract that PROHIBITS the seller from submitting any offer to the lender other than your accepted offer.
If you have any questions, please feel free to contact me at any time! I have mortgage lenders, title reps and CPA's on standby....if I don't know the answer to your questions...I will get them ASAP!
You must have two different approvals on a Short Sale transaction.