Short Sales- NEW Listings

An individual owns the property but are having trouble selling it and need to sell it for less than what is owed on the property. The lender must approve any “short payoff” of their loan in order for the transaction to close.

Typical Short Sale Transaction for a NEW Listing:

• Listed asking price may NOT be realistic
• Some agents (especially initially to attract the first offer) will under price the property just to get some “action”. The listed asking price is just a guess by the seller & agent of what the bank will accept, which can range widely. Nobody will know the real price the bank will accept until about 15-90 days after an offer has been submitted.
• Response to offers can vary depending on several factors, but often 45-90 days. Some transactions with smaller banks get approval in as little as a week, while others (like with Countrywide) take a very long time.
• 1.5-5 month closing, which includes 15-90 days of bank review, plus 30+ days to close
• No contract negotiating on the seller’s part. They just want an offer – any offer – to submit to the bank and let it decide.
• Terms of the contract may remain normal with 17 day inspection period, etc.
• Full disclosures – often no request for repairs, property is sold “as-is”

PROS: final sales price may be comparable to foreclosure prices, full disclosures, less competition that foreclosures because other buyers may be scared off by the potential wait time, often the property is in better condition than a foreclosure but is comparably priced

CONS: BUYER BEWARE!!! It will take a long time to close, often 3-5 months. Meanwhile, you can be outbid at anytime during the process by another buyer and have to start over. Plus, there’s no guarantee that the bank will even accept the short sale and instead choose to foreclose (yes, this does happen). Also, the bank may not accept the offer and ask for more money, even if the offer is at full listed asking price.

CONSIDERATIONS: Be prepared to wait, and wait, and wait some more. Unless you have months before you want to move, don’t bother with short sales. Don’t put all your eggs in one basket. The sale could fall through 3 months into the transaction without warning.

STRATEGY: Many buyers think of short sales as back ups, and many request that I filter short sale out of their property searches completely. Buyer’s can submit an offer on a short sale and during the wait look for foreclosures or private party sellers. Ethically, the listing agent of the short sale should be informed of this when the offer is submitted. If something better comes along a short sale offer can easily be withdrawn.

Short Sales- OLD Listings (90+ Days)

Seller still owns the home, but is more likely to be in the process of a foreclosure. After missing 2 payments, the bank can begin the foreclosure process, which takes a minimum of 115 days. Depending on where the seller is in the foreclosure process, there may be a time pressure to submit an offer in order to delay the completion of the foreclosure.

Other Short Sale Considerations- IMPORTANT!!!

The list price of a short sale may be “shocking” in some cases. If it’s too good to be true, it probably is! The HIGHLY UNETHICAL strategy some listing agents use is to list the property ridiculously low and hope to generate an offer quickly. Without this offer the bank won’t review the short sale, so the listing agent tries to attract anything. They know the bank will never accept the price, but for their purposes they have to submit an offer to get the process started. You could submit an offer of $1.00 on a short sale and the seller wouldn’t care. DON’T BE FOOLED!!!!! From the seller’s perspective their property becomes more desirable if the bank reviews the short sale because it will then get approval and sell quickly after that. Yes, you’re getting used!!! Banks have the final say in the sales price and the listing price means absolutely nothing to them! The bank bases this acceptable sales price on comparable market sales, so you’re not going to get a smoking deal on a short sale if it can’t be supported by market data. As stated previously, you’ll get the same deal for a short sale as you would a foreclosure.

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