The term “short-sale” is definitely a misnomer. The process is anything but short. But if you have patience and can deal with a few headaches, you can end up with an incredible value.
What is a short sale?
In a short sale, the homeowner owes more on the property than what the current market value of that property is. The holder of the mortgage (the bank/lender) agrees to forgive part of the loan amount in order complete the sale. Note- just because a property has advertised itself as a potential short sale does not mean the bank has approved the short sale.
Why does it take so long?
A short sale is contingent on the third party approval of the lender. And with the current state of the real estate market, these lenders have tons of contracts to schlep through. It can take 3-6 months to close on a short sale, mainly because of the sheer volume of these the banks are dealing with right now.
Eeek! Are there any positives to buying a short sale?
Absolutely! Many homes are put up for short sale while they are still occupied by their owners. Usually, occupied homes are in better condition than vacant homes. Another big advantage to buying a short sale is that you will still be dealing directly with the homeowener. This means they can provide you with disclosures and historical information about the property (i.e., has it flooded in the past five years, when was the roof replaced, etc.). Bank-owned properties are usually sold as-is, with no disclosures.
Shouldn’t I just wait until the property forecloses and buy it then?
This is an option. However, some estimates put the shadow inventory– the homes that banks have foreclosed on but have yet to put on the market– at about 3.5 million homes. This means that the home you fall in love with today may not come on the market for another year or so. And by that time interest rates could be higher, prices could be higher, the bank may have done some renovations and expect a higher dollar amount to reflect this, etc. Bottom line- if you find a property you love and are able to handle the time it takes to complete a short sale- go for it!
Want more information about short sales or foreclosures in your area? Call or email me today for a complete list!