Many people are curious about a short sale and the process involved in either selling a home via a short sale or buying a short sale home. There are advantages and disadvantages to both.
What is a short sale? A short sale is a process that a seller uses to sell their home when the market value of the home is considerably less then the loan balance the seller owes on the property. It is a process where by the lender agrees to accept less then what is owed on the property and allow the home to be sold to a new buyer. This is very common today in the Portland metro market area and most other cities across the country right now.
Unfortunately, the process can be very frustrating and annoying for both buyers and sellers due to the fact most lenders take their time in evaluating and negotiating a short sale. It is a long and daunting process. However, if you have a skilled real estate agent helping you then the process can be a much more comfortable journey.
Here are some common questions and answers concerning short sales.
How long does a short sale usually take?
This depends greatly on who is the lender, their specific process and if there is only one lender or multiple lenders associated with the home. Typical short sales take anywhere from 90 days to as much as 6 months or even a year in some extreme cases. This can be extremely frustrating for a buyer to try and wait for a decision from the lender or lenders.
Why is the property still listed as active on the market if a buyer and seller have an accepted offer on the property and are waiting for the bank to approve the short sale?
90% of the time the first buyer who puts in an offer on a short sale usually finds another property that is not a short sale and will back out of the transaction prior to the bank making a decision. This is very common because most buyers want to purchase a home within 30 days or so and have a hard time waiting for the bank. A good listing agent will continue to market the property and get 2 or 3 back up offers on the property to ensure there is a ready and able buyer to close on the property once the bank makes their decision. It is very common for the 2nd offer or 3rd offer to have the choice in purchasing the home. A good buyer's agent will help most buyers that have an accepted offer on a short sale continue to look at other homes that are not short sales in case they find another property they like better and can close sooner.
What price can a buyer expect to pay for a short sale property?
Overall, you can expect to get a small discount below market value of other properties that are not short sales. During the short sale process banks will send out either an experienced real estate agent or an appraiser to get a BPO (Broker's Opinion of Value) or an appraisal on the property. This value is close to what the realistic market value of the property is as of the date of the report. The bank will then use that information to decide what price they are willing to accept on a short sale. Typically, most banks will allow a small discount below the market value of the property because they are saving costs if they receive a payoff on the home now rather then wait for the foreclosure process to gain control of the home. Once the bank makes a decision they will either accept the offer or make a counter offer to the buyer's offer. If the buyer does not accept the bank's counter offer then the listing agent will go to the back up offers and see if they want to proceed and if not then he or she will put the property back on the market knowing exactly what price the bank will accept. It is usually a very short time after that when a new offer will come in at exactly what the bank wants for the home. Short sales with an approved price from the bank go very quickly because they are usually a little under the real market value of the property and no more decision time is needed from the bank.
Do most lenders allow a short sale or is a foreclosure more common?
Most lenders will accept a short sale. A very good listing agent can get the foreclosure date postponed during the short sale negotiation process. As long as the offer is realistic in terms of what the actual market value of the property is then most short sales end up selling to one buyer or another.
Should I consider buying a short sale or selling my home on a short sale?
This depends on your specific circumstances and your real estate goals. An experienced agent in short sales can help you discuss all of the advantages and disadvantages and the options available to you. For more information please visit www.daveandjeremy.com and let us know your desire to learn more or feel free to share your situation with us so we can discuss your options in more detail.