In all the real estate transactions I have ever been involved in, nothing has come close to the sheer frustration I have encountered dealing with short sales. Every single one I have dealt with was nothing but problems from day one. Hurdle after hurdle is put up in front of you, day after day. Just when you get over one, another appears to take it's place. Then, when the finish line is right in front of you, they move it. If you are going to consider buying one there are some facts you need to know.
1. Don't be in any kind of hurry. I have a had a bank take six weeks to give us a response. If the response is no, you may have lost out on numerous properties that you would have loved.
2. If they do say yes, they may have some whacky conditions they want you to follow. I have had a bank take over a month to say they would accept our offer, only to then insist we close the escrow in two weeks. With a cash offer, that would be possible. With a loan, it will never happen. You would think being a financial institution they would realize you really need 30 days to make sure it can get done.
3. There are many different people who can derail the deal. I have had a seller, three weeks in, demand a referral fee or she would pull out of the deal. Uh, lady, you do know you are not allowed to profit on a short sale, right? Since the holder of the second is asked to basically lose everything, expect a great deal of resistance from this quarter.
4. The seller is always in financial distress and will not fix a single thing. If they can't make the payments, they most likely can't fix the leaky water heater or broken garbage disposal.
5. Buyers have a long time to change their minds about the deal. I have had a buyer pull out the day before escrow closed because, as she put it, it just took so long that she had to much time to dwell on it and become bitter. Don't take it personally, the asset manager at the bank does not have a vendetta against you. They are just not being paid enough to really care that much.
6. The bank makes an initial assessment as to how much they want to make to let the property go. This can be a major obstacle. I am doing a short sale right now where the termite report came back at $1,600 bucks. Even though the bank agreed to do the section 1 work in the contract, they are refusing now because it puts them over the limit they set for themselves. My client is having to come in with an additional $500.00 to close the deal. Talk about frustrating. When I had to call him, I felt sick to my stomach.
I guess the point I am trying to make is, if you have another property in mind that you like just as much as the short sale property, try to buy that one. It will save you alot of hassle and potential heartbreak. Until the banks get some common sense and make it easier, short sales will continue to be a menace. You would think saving a property from foreclosure and a seller from bankruptcy would make the parties involved eager to get the deal done. It doesn't.