Home Buying in 72653>Question Details

Debi Kaminski, Home Buyer in Mountain Home, AR

What is a short sale?

Asked by Debi Kaminski, Mountain Home, AR Wed Aug 22, 2012

We have the highest bid and are waiting to hear whether we will soon own it.

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Answers

3
Your agent allowed you to bid on a short sale, and you don't know what it is? Sit down and have a heart-to-hear with the agent.

A short sale is when an owner tries to sell his house for less than it's worth. In those cases, the lender's approval is required. Example: Someone bought a house back in 2006 for $300,000. Today it's worth $100,000. The owner puts it on the market as a short sale for $100,000. You offer $100,000. The owner agrees. Then the signed contract goes to the owner's lender who either disapproves or approves the deal. Why is the owner's lender involved? Because that's who will lose money--the difference between the purchase price and what's owed. The lender has to say: "I am willing to lose $200,000 on this transaction."

Sometimes short sales result in multiple bid situations. In the example above, one person might offer $95,000. Another might offer $100,000. A third might offer $105,000. That third offer is the highest one. However, the listing agent wants to send the strongest offer (which isn't always the highest offer) to the lender.

Note: Not all short sales succeed. In fact, many fail. Often, the bank rejects the offer. Other times, it takes so long (3-6 months or more is typical . . . . 12 months isn't rare) that the buyers back out.

So, that's what a short sale is. I can't believe, though, that your agent allowed you to pursue a short sale without you knowing what it was and what's involved.

Hope that helps.
2 votes Thank Flag Link Wed Aug 22, 2012
Great reply Don! It is amazing reading some of the questions asked on here by people who have Agents. I'm a new Agent, and I know I don't know everything. I however will not have any clients of mine feeling that they need to ask a website about the buying , or selling process that they are in. It seems a lack of communication between Agents and clients is driving a majority of the questions that I'm seeing asked.
Hope others curious about Short Sales see your response to this!
Flag Wed Aug 22, 2012
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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I agree with Don, you made an offer (you don't bid) on a short sale not knowing what it is. That is amazing to me.
1 vote Thank Flag Link Wed Aug 22, 2012
And Don and Tim didn't ask the second obvious question:

How could you possibly know that you have the HIGHEST BID?
0 votes Thank Flag Link Wed Aug 22, 2012
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