Central Oregon Real Estate - Short Sales

By
Real Estate Agent Oregon #200202200

What is a Short Sale in Oregon?

A "short sale" real estate transaction is when the Sellers don't get enough to pay off all of the secured debt on the property.  The debt can be a variety of liens, or taxes owed, but is usually mortgage debt.  In a short sale the creditors have to agree to accept an amount less than what is owned.

What should Oregon sellers do?

When a seller knows, (or even thinks) that they are going to have a short sale, they need to seek advice from someone with knowledge of short sales.  Sellers need to contact their bank and get all of the appropriate forms from the lender.  Banks want to know for sure that the property will not sell for more.  They'll usually require some Comparable Sales. 

When the Seller lists the home on the Central Oregon MLS, he or she need to tell their Realtor that it is a short sale.  They then need to put on the listing "all offers subject to 3rd party approval". 

How Short Sales Work

An Oregon short sale works like this-  The Buyer brings an offer to the Seller, knowing that it is subject to 3rd party approval.  The Seller then either accepts, rejects, or makes a counter offer to the offer.  After the offer is ratified (both Buyer and Seller have agreed to the terms), the Seller then submits the offer to the Creditor(s) for approval.  If the Creditor accepts the offer, the buyer and seller move forward with the deal.

 Example

Let's say that the owner of a Bend property owes $250,000 on a home, but the current market conditions in Bend won't allow the home to sell for more than $200,000.  The owner needs to sell, so puts the home on the market at $210,000.  THIS WOULD BE A SHORT SALE.  The seller would have to make the listing contingent upon 3rd party approval, and would want to contact the mortgage company.

Buyer Beware

Short sales can take a lot longer than normal real estate transactions in Central Oregon.  I've heard of it taking as long as 6 months for banks to decide whether or not they'll take the offer.  Short sales do work, but they're not for the buyer that is on a schedule.  Short sales usually take a long time, and it's very hard to predict the closing date of a short sale.   Buyers usually want to make all "Due Diligence Contingencies" to start after the 3rd party approval.  But sometimes bank will not allow this.  The buyer may end up paying for a home inspection, (or something else), only to find that the Bank has rejected the offer.  The buyers usually don't have any recourse for the loss of their funds.\

 Summary of Short Sales in Central Oregon

Short sales are becoming common in Central Oregon.  This is because the Bend area was appreciating very high in the past 3 years.  Now the market has slowed, and prices have dipped.  A lot of home owners bought at the peak of appreciation with 100% financing.  Now they owe more than they can get for their home. 

I advise anyone that is heading into a Short Sale situation to speak with some experts, (lawyers, accountants, etc.).  Short sales can be long, drawn-out processes.  They will take a toll on all involved parties. 

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