Question: I am interested in a house that is a short sale. How does that work?
Answer: That is a huge question! Here is the very simplified version of the answer:
•1. The seller owes more money to the bank than home is worth but still needs to sell it.
•2. The seller needs to get permission from the bank to sell the house for market value and have the bank agree to take less than what they owed.
•3. If there is more than one loan or other liens against the house they all have to agree to accept a payoff that is less than what they are owed. The first lender will decide how much the house must sell for and how much they are willing to give to any junior lien holders to accept a short payoff.
•4. The junior lien holders then decide if they will accept what the first lender offered or if they want to stop the sale.
•5. Any of the lien holders can ask the seller to contribute money to close the deal. The seller can agree or refuse to do the short sale.
•6. The buyer can either accept the price the bank has insisted on (if it is higher than their original offered price), or they can say they do not want to buy the house.
•7. The process of short sale approval can take anywhere from a month to a year. It is only worth making an offer on a short sale if you are motivated to wait out the process and do not have a deadline where you must buy that house.
•8. Once everyone agrees to the price and terms, the seller, the buyer, the banks, then the sale goes pretty much like a normal transaction but must be an As Is sale with no money going back to the seller for anything.
•9. This is a very simplified explanation and there are many nuances to a short sale, but this is the general overview.
Keller Williams Realty