| A short sale is different
from a foreclosure in that the bank has not taken over the
property yet and it is still owned by the Seller. However,
due to the depreciation of the housing market, the Seller can
not sell it for more than what is owed on it. The Seller
is upside down, they owe more on the house than it is worth.
However, they need to sell it, as they may not be able to afford
the payments anymore. They hope they can find a Buyer and
present the deal to the bank and that the bank will accept the
offer and let them off the hook for the larger mortgage.
This process may take many months and the outcome could be that
the bank does not accept the deal and forecloses instead or
counters with a higher price, even though both Seller and Buyer
have agreed. This is why short sales can be very
frustrating. The process starts when the
Seller hires an agent to put the home on the market as a short
sale. The list price is less than what they owe to the
bank for the mortgage. However, the price needs to be
thought out, as the bank will not just accept any price.
The Listing Agent must prove the price is the market price.
Sometimes it must stay on the market for three months before a
bank will consider an any offer. During that time,
multiple offers may be received. This is the frustrating
part for Buyers, as although they may have an accepted offer by
the Seller, sometimes the Sellers are not loyal and actually
accept several offers in order to get the highest and best deal.
Since the bank has the final say, the seller can accept multiple
offers. The deal is not consummated until the bank picks
one and accepts or counters, if they pick one at all.
Not everyone can short sale a home, as you
must prove that you can not afford it. If you have
significant assets or make too much money, a bank may not let
you off the hook to short sale. You must prove distress.
When bidding on a short sale it is wise to
go with the listed price (hopefully the listing agent did their
homework and came up with a price the bank will approve).
Since the Seller is not making any money on the deal, they have
no incentive to list the property at a higher price. They
just want a price adequate enough for the bank to accept.
To accept an offer at a lower price may get a rejection from the
bank or a counter. The Buyer then may not accept the
counter and time has then been wasted and the bank may begin
foreclosure proceedings. Time is of the essence for a
short sale.
Also, as a Buyer of a Short Sale, make
sure in the case of a condo and some homes, that the Homeowner
Association dues are paid up to date and not behind, as well as
taxes. You do not want to be at the closing table and
discover you owe past due HOA fees or taxes. These fees can add
up.
So Buyers and Sellers beware, Short Sales can be a
very long and frustrating process where the bank has the final
say. Do not count your chickens before they hatch.
Look for Pre-Approved Short sales for certainty. |
