Most people have heard the term “short sale” associated with certain real estate transactions. It’s not an endearing term given to a real estate transaction that gets wrapped up quick and easy, unfortunately.
The actual definition of a short sale is the sale of real estate where the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished. A short sale is the last step before foreclosure.
As a seller, this can be an attractive route to go to avoid having a foreclosure on your shoulders. As a buyer, it means you’re competing with fewer buyers, but be prepared for a long process.
Here are a few tips to remember if you find yourself on the buyer side of a short sale transaction:
1. Hold on and be prepared for anything. Once an offer is made, it must go to the bank for final approval. The bank knows – in most cases – they won’t make up all the money that is owed to them, but they do want to make sure they are getting a fair price. Do not assume the bank will just accept any offer, they won’t. In fact, be prepared for the bank to reject it. Don’t start mentally preparing for the move just yet.
2. Be prepared to wait. It could take anywhere from a few months to the rest of your life to hear back as to whether your offer was accepted or rejected. This is serious business for all financial stakeholders involved here, and they will take their due diligence to decide if this is the best offer. As such, please don’t call your real estate agent every few hours asking if they’ve heard anything. Trust me, when they do, you’ll be the first to know.
3. Get your ducks in a row. Make sure you’ve got your act together quickly, because if the offer is approved and accepted by all parties. It can take some real finesse to coordinate everything that needs to happen within a certain time period. The bank that owns the mortgage may have one date in which they want everything to close by, and then your lending bank may have their own set of dates, plus the inspections, etc.
4. Elbow grease or write a check? It is highly possible that at some point the homeowner realized that he wasn’t going to come up with the money to save the house from being sold – and – wasn’t going to see a penny from the short sale himself. Thus, he pretty much abandoned any and all maintenance or repairs for the property and basically let it go into a state of neglect. All of which you have now inherited!
Although neglect is an unfortunately side effect in short sales and foreclosures, they can sometimes be overlooked if you’ve gotten a great deal on the home and are ready and willing to deal with this sad but common occurrence. So either be ready to roll up your sleeves and do the work yourself, or write a check and hire out the work.
So the main goal here was to educate a little on the basics of a short sale and allow you to decide if going that route is a viable option for you. If you do, tread lightly and realistically. Don’t put all your eggs in one basket and patience will definitely be needed here. And if you do decide to throw your hat into the short sale game, good luck!