Buying a short sale is very different than buying a bank foreclosure or from a regular seller. So first... what is it?
A short sale is when the owner is "upside down" or owes more than the home is worth. In order to sell, he would need to bring cash to escrow to sell, or would need the banks approval that the bank will accept less than the amount they are owed. In order to accept less (accept a short sale) the bank must convince themselves that the home is actually worth less than they are owed, and that there is no other way they will get the lost money out of the owner (like from money they have in savings, or an IRA, or another home they own).
The process goes like this. First, the real estate agent puts the home on the market. The list price has no relation to what is owed, and is probably listed somewhat low for the market, in order to get an offer. The list price is their "bait". Once they receive an offer, they send it in to the bank, along with an application from the seller. The application contains the reason why the seller feels the bank should let them off the hook. Their tax returns, bank statements, and a letter explaining what their hardship is are all included. The hardship must be a medical problem, divorce, forced relocation, job loss, etc. It can't just be "I'm upside down and don't want to keep paying".
Now here's the kicker... the bank takes as long as they want to decide what they are going to do. It's usually a minumum of 60 days. But it can be 4 months, like my last one!
But let's say the bank comes back in a record 30 days and says they will agree to let the seller off the hook... they agree to a short sale. At this point they come back with the price they need to sell for in order for them to agree to the short sale. It's rarely the same as the list price. I'm in contract on one now that was listed for $161K, the bank came back at $182K. The other one I'm in escrow on was listed for $214,500, and the bank came back at $240K. The bank deteremines the price they will accept (if they accept the seller for a short sale) after they have done an appraisal, regardless of what the list price was.
OK, moving on... so let's say the bank has told the listing
agent they will do the short sale, but for THEIR price, which they give the listing agent. (It's actually more complicated, because they actually give the agent a "net" number, which the agent has to compute into a sales price, considering all the liens and other charges.) The agent goes to the first person who submitted the offer to see if the bank's offer is acceptable. (That's because the first acceptable offer is in contract with the seller.) Many times, it has taken so long the first buyer has already found another home and moved on. Or, if the price comes back higher, the first buyer may not qualify at the new price. Or don't want to. So, if the first buyer passes on the bank's offer, the listing agent then calls the other agents who have made offers to see who else is interested. At that point they can choose the offer that will net the bank the amount they need, and the one that seems to offer the most likelihood of being able to close.
THAT's the person who will end up buying the house.
At the point the new person says YES, the inspection time periods begin, and that's when you really have a good look at the home from an inspector's viewpoint... but we'll save that for another discussion!
Bottom line -
* It may take months to get an answer.
* There's no guarantee what the price will be , regardless what the list price is.
* It's somewhat of a crapshoot as to who the buyer will end up being.
What it takes to be a successful short sale buyer is patience, and to not have a pressing timetable. It also helps to not expect concrete answers from your agent, as they are hard to come by. But you can be successful.... just hang in there!
The process goes like this. First, the real estate agent puts the home on the market. The list price has no relation to what is owed, and is probably listed somewhat low for the market, in order to get an offer. The list price is their "bait". Once they receive an offer, they send it in to the bank, along with an application from the seller. The application contains the reason why the seller feels the bank should let them off the hook. Their tax returns, bank statements, and a letter explaining what their hardship is are all included. The hardship must be a medical problem, divorce, forced relocation, job loss, etc. It can't just be "I'm upside down and don't want to keep paying".
Now here's the kicker... the bank takes as long as they want to decide what they are going to do. It's usually a minumum of 60 days. But it can be 4 months, like my last one!But let's say the bank comes back in a record 30 days and says they will agree to let the seller off the hook... they agree to a short sale. At this point they come back with the price they need to sell for in order for them to agree to the short sale. It's rarely the same as the list price. I'm in contract on one now that was listed for $161K, the bank came back at $182K. The other one I'm in escrow on was listed for $214,500, and the bank came back at $240K. The bank deteremines the price they will accept (if they accept the seller for a short sale) after they have done an appraisal, regardless of what the list price was.
OK, moving on... so let's say the bank has told the listing
agent they will do the short sale, but for THEIR price, which they give the listing agent. (It's actually more complicated, because they actually give the agent a "net" number, which the agent has to compute into a sales price, considering all the liens and other charges.) The agent goes to the first person who submitted the offer to see if the bank's offer is acceptable. (That's because the first acceptable offer is in contract with the seller.) Many times, it has taken so long the first buyer has already found another home and moved on. Or, if the price comes back higher, the first buyer may not qualify at the new price. Or don't want to. So, if the first buyer passes on the bank's offer, the listing agent then calls the other agents who have made offers to see who else is interested. At that point they can choose the offer that will net the bank the amount they need, and the one that seems to offer the most likelihood of being able to close.THAT's the person who will end up buying the house.
At the point the new person says YES, the inspection time periods begin, and that's when you really have a good look at the home from an inspector's viewpoint... but we'll save that for another discussion!
Bottom line -
* It may take months to get an answer.
* There's no guarantee what the price will be , regardless what the list price is.
* It's somewhat of a crapshoot as to who the buyer will end up being.
What it takes to be a successful short sale buyer is patience, and to not have a pressing timetable. It also helps to not expect concrete answers from your agent, as they are hard to come by. But you can be successful.... just hang in there!
Flickr photos by doug8888, seekyu, flexyourhead, thinkpanama
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