WHAT ARE SHORT SALES???Short Sales are like Pre-Foreclosures. The owner is behind on payments and is trying to sell the house before the bank forecloses. Short Sale refers to the sellers attempt to sell the house for less than what is owed. This can only occur if the bank allows it. The bank, not the seller, ultimately controls and decides what price a Short Sale can and will be sold for.
In simple terms, there are Good Short Sales and Bad Short Sales.
Good Short Sales - A good Short Sale has been approved by the bank and the bank has agreed to accept the Listed Sales Price for the property.
Bad Short Sales - A bad Short Sale has not yet been approved by the bank. The Listed Sales Price is an arbitrary number that the Listing Agent came up with to generate attention on the home. Their goal is to quickly solicit an offer to submit to the bank in order to stall foreclosure and begin the Short Sale approval process (the typical Short Sale bank approval/review process takes 1-2 months). The amount of the offer matters not at that point, they just need an offer, any offer, in order to have something to submit to the bank. After submitting an initial offer to the bank, the bank will come back with a response as to what they MAY consider taking. At that point, the agent and seller now know what price to legitimately list the home for. More times than not, the price the bank is willing to accept is significantly higher than the original listed price.
The bank will NOT agree to or consider a price less than what is owed on a home until the seller markets the home and solicits an offer for the bank to consider. Short Sales would be a lot simpler to navigate if this process worked in reverse and the bank gave the seller an up-front indication of what they were willing to accept, thus allowing the seller the market and price the home realistically – but they don’t!
Unfortunately, the Short Sale listings don't identify what stage of the process they are in. In a perfect world we would be able to look at a Short Sale listing online and be able to tell where they are at on the process and in turn know whether or not the Listed Price is realistic and has been approved. The only way to reasonably interpret this is through a series of phone calls and a little research.
My recommendation, if you see something that looks good, forward it to me. I'll find out if it's a Short Sale, verify the legitimacy of the price, and identify where they are at in the process.
Other issues/challenges/considerations with Short Sales:
2) Like Foreclosures, they can't be purchased contingent on the sale of another home. The buyer of a Short Sale or Foreclosure must be able to enter the contract with the ability to purchase without needing to sell another property first.
3) They are typically sold “As is”
4) Only about 10% of available Short Sale inventory on the market has been bank approved. The other 90% is simply fishing for offers to stall foreclosure.
1) The approval process can take up to 8 weeks and the banks, believe it or not, are less than cooperative.
