Not Really Short!
I had a client come to me once with the request that we only look at short sales. My natural question (after I picked my jaw up from the floor) was “Why”? Her answer was that she had heard these homes were the quickest to buy, because the seller wanted a “short” sale. Ok, well…the short in short sale does not mean quick.
The definition of a short sale is that there is more owed on the property than the property is worth, so selling it would mean that the homeowner would be “short” on funds to pay off the debt.
Homes go into a short sale situation generally when something happens in the sellers life, divorce, job loss, job transfer,bad mortgage with balloon payments, medical bills and many other reasons.
Sometimes a seller is behind in a mortgage, sometimes they are not. We are currently handling a short sale where the couple got a transfer in employment right after they refinanced. They unfortunately took all the equity out of their home, before they knew about the transfer, and now they have no choice but to sell it short.
So, Don’t let the title of a Short Sale fool you, Short sales are anything but… short.
First, the seller must be approved for a short sale by having a packet consisting of an appropriately phrased hardship letter, months worth of bank statements, w2s, lists of assets and liabilities, and various other things that individual banks require..just about everything that would be required if they were applying for a loan.
The Bank then pushes the papers around for a while and finally after much weeping and wailing and gnashing of teeth (usually by the listing agent) will assign a negotiator. Once the negotiator has have an offer to deal with, he will order a b.p.o (brokers price opinion) and then begin looking at several factors:
- What the bpo says on the “as is” market value of the home
- What percentage of loss the bank is willing to take over and above any mortgage insurance
- The difference between what they will realize by selling short vs foreclosure
- How the clouds are aligned on Friday (not really I just made that up to see if you were awake)
- What, if anything the seller can contribute (this is usually nothing, but they look at it anyway)
Processing a short sale can take anywhere from 2-12 months depending on the bank, so if your apartment complex is about to be bulldozed or you have sold your home and have to be out in 30 days, don’t look for a short sale.
But, if you are bound to a lease and have some time before you buy, you might just be able to find a short sale that you and your agent can make a good offer on and be first in line to buy. Just remember to be pre-qualified for your loan, brush up on the meaning of “Patience”, and Read our next installment “ Can You Just Make Short Sales Easy?” Also, call us with questions. We are happy to help you in any way we can!