Short Sale Home » Short Sale Buyers » Managing Expectations For Short Sales

Expectations can prove to be frustrating for both buyers and sellers in a short sale. Due to the excitement of closing a short sale deal, there have been actually quite a number of lost sales due to the obstacles involved in closing these sometimes difficult transactions due to the number of parties involved in making the sale happen. The short sale process can be quite trying if you do not know what you’re getting yourself into.

1) Short sales will definitely test your patience and make you question yourself how much you actually want the home – 3rd party approval comes from the lenders Loss Mitigation Department (which more often than not is understaffed, with a ton of short sale paperwork on their desks). The initial approval on the short sale sale and purchase amount can take around 30 to 60 days, but sometimes even longer. The listing agent has no control over this – it’s the bank. Thus, when offering a earnest deposit on a short sale, make sure it is written to “Escrow To Be Determined” to not tie up your money with such a lengthily process, if doable (consult your agent).

2) Seller won’t be able to help – Don’t expect the short sale seller being able to help or contribute more to the sale. The bank or lender does not like to give out more money than needed so prepare your finances ahead of time and don’t count on getting anything back. If they make a counter to your initial short sale offer price, then it will most likely delay the process at least a few more weeks to obtain another approval.

3) The bank won’t accept all offers and will drag their feet – There may be a high chance that your offer is not the only offer on the short sale property. If more are coming to the seller’s agent, the bank may drag their feet to get their goal price. Banks have a secret pricing formula, but of course they want to reduce their overall loss ASAP.

4) You get what you see – The property is most likely being sold “as is” with no warranties or repairs. You will get an opportunity to inspect the property but once this is done, they will want to move as quickly as possible to close the books for this short sale.

5) Read the fine print – Some banks or listing agents have included in their addendum wording that can be called a “Quitclaim Deed”. It means, that they will pass title to you, but it won’t necessarily be a clear title. A clear title means you will own it free of past problems. The Quitclaim Deed means you won’t get any Title Insurance on the property either, which makes your risk quite high. If there was a HELOC taken out on the property for $60,000 before hand and it wasn’t registered prior to closing, it means you’ve just bought yourself a lien.

6) Patience, Patience, Patience – Make sure your agent writes in an “out” for you in a short sale addendum which allows you to back out prior to the 34rd party (lender) approval.

Tags: buyers and sellers, initial approval, loss mitigation department, short sale obstacles, short sale problems