Imagine that you are a buyer looking to purchase your dream home. It has been a long search and you haven’t found anything that you want to call home. Suddenly one night while searching on-line (for the one millionth time) – you find it. The pictures are awesome and you can’t wait to see it. You call your agent in the morning and go out that afternoon. It is everything that you want in a home, it is available to buy and it is in your price range. Hallelujah! You are batting a 1000 until your agent utters the following words…. “It’s a short sale”. ‘Great’ you say because you think that means you can buy it faster.
Not really. Just to define terms – a ‘short sale’ is when the lender agrees to accept less in the sale of the home than the owner owes on the loan. In other words, if the homeowner owes $100,000 on their home but can only sell it for $80,000, the bank agrees to accept the lesser amount. Now there are many steps and layers to a short sale but that’s the basic definition. Because of the economy and current condition of the housing market, short sales have risen in popularity.
Back to your story. The house you love is listed as a short sale and your agent is reluctant to submit an offer. Let’s explore the reasons why:
- First, there is nothing short about a short sale. I will explain the timing involved in a short sale in the next post but suffice it to say that if you need to be out of an apartment in 30 days, a short sale is not for you.
- Second, short sales are a relatively new area of real estate specialty. It takes training & constant education to know how to effectively manage a transaction of this magnitude. Many listing agents are not prepared for the level of detail and daily management involved in a short sale and this can cause a delay in getting it closed.
- Third, often the sellers are not always cooperative or timely with their documents. All homeowners in a short sale transaction by definition are experiencing a hardship. It could be the loss of a job, death of a family member, etc. and the level of stress & distress can be overwhelming. Putting together the documents needed for the short sale can be too much to deal with for some and their response times are slow.
- Finally, the banks are overwhelmed. If you consider the rise in short sale requests along with record numbers of foreclosures and you can understand why the response time from the bank can be weeks.
Now given all of the above facts, you still want to purchase the home of your dreams which is a ‘short sale’. What happens now and how long will you have to wait? Stay tuned for my next post where I give you the timelines from three (3) of the major lenders.
