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Does the Sales Price Seem too Low?? It's Probably a Short Sale and that Means "NO" Sale!

By
Real Estate Agent with Berkshire Hathaway HSCP

A client emailed two MLS numbers of properties she would like to see. They were priced way under market and she thought it would be an opportunity to get a great buy.

Again I am reminded of the old saying, if something looks too good to be true it usually is.

In this case the listings were both short sales. That means that the homes are listed at a price that is less than what is owed on the property. In these cases, the properties were listed $100,000 less what was owed. In a short sale the bank must agree to accept less than what the borrower owes. Will they agree to a loss? Sometimes yes but usually no. I have seen a handful of short sale listings actually close escrow and usually it is at a value only slightly under what is owed on the property, so the bank isn't losing that much money. In all cases, the seller must have a true hardship as the reason they can't make the mortgage payment (loss of job, death of a spouse, hospitalization, etc. ). Additionally, buyer and seller will have to wait weeks to get an answer from the bank as to whether or not it will allow the short sale to go through and it might change its mind at the last minute prior to close of escrow.

You might think banks would prefer a short sale to foreclosure because the borrowers are probably going to end up in foreclosure anyway. However, many short sales are due to owners taking out equity lines of credit on their homes for remodeling, purchasing a car, paying off credit cards, going on vacation, etc. Other short sales are investors that hoped to flip the property but it flopped. And a few others are fraud where a home's value was inflated so the new owner could get cash back at closing with no intension of making the payments. It's not easy for banks to make decisions when every single pre-foreclosure story is different.

If I were a buyer, I wouldn't waste my time with a short sale unless I didn't care whether or not I got the property. As a seller, unless you have a true hardship you should look at other ways to make the mortgage payment like taking on a second job because getting a short sale approved is unlikely.

Comments (1)

Erin Stumpf (Attardi)
Coldwell Banker - Sacramento, CA
916-342-1372 / DRE# 01706589 Sacramento, CA
Short sales can be a big win-win or a complete waste of time.  It always shocks me that so many agents are so irresponsible in listing short sales they know are priced too low, or where the seller is under no financial hardship.
Nov 11, 2007 05:05 AM