In the past 2 months, I have been asked over and over about short sales, what happens, what they’re all about, etc.  So I figured,  it’s time to fill you in on what these things are all about, and what you can expect if you plan on purchasing a home that’s being sold as a short sale.

A short sale is the step before foreclosure.   In most circumstances, the homeowner is unable to continue paying their mortgage (not to mention HOA fees, if any, and property taxes), and the value of the home is worth less than what the owners owe on it.  For example, if you purchased a $1,000,000 home in June of 2005, today the home may be worth $900,000.  In order to sell the house, the bank has to approve any offer recieved on it, in other words, the bank comes up “short” when they get their payoff.

Short sales require a lot of patience, as most banks have multiple short sale cases on their books, and are not adequately staffed to handle them.  They alsotake a long time to  approve or disapprove the offer.  Although the seller is still on title, it’s the bank that ultimately decides exactly how much of a loss they are willing to take.  Often times, the buyers end up backing out of the transaction for various reasons, but often times, they get fed up with waiting or locate another property that works for them.

As a seller, the benefits of doing a short sale is that it’s better than having a foreclosure on your credit, and in the meantime, you can still live in the property.  For a buyer, you can sometimes make out with a pretty sweet deal, but it requires a lot of patience.  The downside is that you don’t know what interest rates are going to do, and by the time the bank makes a decision, you may no longer qualify for the loan you originally qualified for.

So what do you do?  You’ve located a property that suits your needs, is in your price range, but it’s a short sale.  I’d say put in an offer, but don’t stop looking or pass up another house that may suit your needs.  A good agent will structure your offer so that you can back out at anytime and not risk losing your deposit.  Now, of course, this is just a brief summary and my experience with short sales.  I’d love to know what you think or hear about your experiences.

By The Khoury-Kaileh
Categories : Uncategorized

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