I get asked a lot, "What's a short sale?" "How do I buy a short sale?" and "How does a short sale work?" Because I have navigated many sellers through the difficult and sometimes long short sale process, I'd like to help answer those questions here in my blog.
Simply, a short sale is when a home is being sold for a value less than what the seller owes. Consequently, the seller has to get their lender's final approval to sell short of what they owe. I'm not going to get into what happens with the deficiency but I am going to approach this from a buyer's position. "What happens when we make an offer on a short sale?" Since each lender handles their short sales slightly different and the process may vary greatly in regards to the length of time it may take, here are the basic "milestones" to look for (expect variations and delays to occur at any one of these steps).
1. Home is listed and due to a number of reasons, seller is moving because they have to. Relocation due to work changes tends to be the happiest reason, but there can be a very sad story that goes along with short sales involving moderate to severe financial hardships for the seller (i.e., job loss, illness, death..).
2. Price it is listed at may be reduced several times in order to quickly reach the best price for the home to attract the most buyers. My listings typically take 2-3 months to reach their ideal price unless sellers decide to move it quicker and price it lower from the start.
3. One or multiple offers may be negotiated between buyers and the seller, all subject to final approval from seller's lender. The negotiating may take a day, a few days or a few weeks depending on buyer and seller circumstances.
4. A hardship packet is submitted along with any and all offers to the seller's lender and lender orders a BPO -Broker's Price Opinion (which is similar to an appraisal). The agent prepares the offer(s) for submittance by obtaining a preliminary HUD (from title company or attorney) which will show the seller's lender their "net" for each offer. (Basically, they look to see how much deficiency there is with each offer and which one will bring them the most, paying down the most debt. If property taxes are owed, it will be paid from this sale and a buyer will not incur the back taxes.)
5. The BPO may take as little as 1-2 weeks if you're very lucky, to up to several months. In most cases when the short sale transactions have run the smoothest, I've seen the BPO's done within a month.
6. The market value is reviewed by the seller's lender, along with all offers that remain. (Oftentimes buyers can't wait this long for an answer to their offer and they get antsy and anxious and withdraw their offer. I think this is a mistake and they should hang in there. My job as the agent during this time is to be their coach, because they become doubtful and their trust diminishes. The process at this point is not in my hands.
7. Response! Sometimes it's "make your highest and best price", othertimes it's immediate acceptance followed by specific terms to adhere to, deadlines and an approval form sent by the seller's lender. They typically allow for traditional financing criteria to be met, time for inspections and appraisal when needed.
TIP: If you are a first time buyer and requesting closing costs, consider the fact that you may need to raise your offered price in order to cover your closing costs, especially if you are competing against other buyers.
TIP: Be patient and try not to panic. In the end the buyer gets a pretty nice deal on a pretty good home, and you know it otherwise you wouldn't have been interested in the home to begin with:)
For more on short sales, please feel free to contact me directly.
Thanks for reading!
Stephanie Jacques
Associate Broker
BHG THE Masiello Group
603-352-5433 (x1948)
www.stephaniejacques.masiello.com
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