Are short sales really good deals? what should buyers know before pursuing a short sale property?

Asked by Bernadette, Maryland Sun May 13, 2012

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18
Jeff Escher, Agent, Rockville, MD
Mon May 14, 2012
There are good deals to be found with short sales, but the lenders will perform their own property valuation. If the Contract sales price does not closely match the lender’s property valuation, the lender could counter-offer the contract or reject the contract.

A quick look at all the closed short sales in Montgomery County in March/April found they sold for an average of 96% of list price - which isn't much different that non-short sales. Additionally, if you need closing cost assistance, lenders will usually not approve more than a 3% seller concession. If the seller has an FHA loan, the lender will only approve a 1% seller concession or less.
1 vote
Jonathan Lah…, Agent, Rockville, MD
Sun May 13, 2012
Hi Mary,

Before pursuing a short sale deal, I always ask my clients what their time frame on moving is. If you need to move immediately, then a short sale may not be ideal for you; most short sale deals take an average of 90 days to negotiate with the bank, in some cases it can take longer... there is also no guarantee the short sale will ever be approved.

If you are not facing a deadline to move, then a short sale deal MAY be ideal for you.

I'd be happy to help you through this thought process. Please take a look at the blog I wrote below about short sales.

Happy home hunting!
1 vote
Ksc11011, Home Buyer, Rockville, MD
Thu Aug 6, 2015
If you are not facing a deadline to move, then a short sale deal MAY be ideal for you. The short sale bank will not provide for repairs so normally short sale transactions are sold in as is condition. Buyers may have to make some repairs in exchange for a home priced at a good value.
Web Reference:  http://www.q8clicks.com/
0 votes
Diane Christ…, Agent, Sarasota, FL
Fri Sep 26, 2014
In a short sale the sale is subject to approval by the seller’s lien holders. Without that approval, the seller cannot close and you cannot purchase that home.

Your contract should include a Short Sale Addendum. The short sale addendum will stipulate how long you the buyer are willing to wait for the seller's lender(s) approval and other short sale terms.

Short sales are typically being sold “as is with right to inspect.” The seller does not have the financial ability to pay for repairs to the property if repair issues are found during your inspection period. For this reason, short sales may not work for buyers that are using VA or FHA financing.

After the contract and short sale package have been submitted to the seller’s lender(s), your next step is to wait. If there’s only one lien holder, it typically takes less than 2 months to get a response. If there are multiple lien holders, it may take 3 - 6 months or more for all parties to respond. If any one of those lien holders say no to the terms of your contract, the sale cannot be completed.

Once the lenders and/or lien holders have given approval for the sale to proceed, they usually give a date upon which their acceptance expires. Often this deadline is 3 weeks or less. As a buyer of a short sale, you must have patience to wait for that approval, then act quickly to do inspections, obtain your financing and close.


Regards,

Diane Christner, Realtor, GRI, SFR, CNE
Bright Realty
Sarasota, FL

http://www.DianeChristner.com
http://www.DianeChristner.info
0 votes
Christopher…, Agent, Tarrytown, NY
Thu Dec 19, 2013
They can be but buyers should know that the banks are a lot more savvy these days when it comes to the appraisal. They do a broker price opinion as well to make sure they aren't leaving anything on the table.

Chris
0 votes
Rebecca Gril…, Agent, Rockville, MD
Thu Dec 19, 2013
As others have posted above, they *can* be a good deal, but just because a property is selling as a short sale doesn't automatically make it a bargain. You have many more headaches to deal with, including waiting months for the bank to respond to your offer, with no guarantee it will be accepted.

Most distressed properties have been neglected for years (if the owners don't have enough money to pay the mortgage, they're not going to make repairs or renovate), and the sales are typically as-is, so you're usually not able to negotiate with the seller to make repairs. You really need to do the math to find out how much money you need to put into the property, then compare to sales of similar properties in the area, including ones in move-in ready condition. You want to make sure you're saving enough money to make it worth your time and trouble.

I actually wrote a blog post (see below) about this subject the other day! Although my example deals with bank-owned properties, which are different than short sales, the point is still the same. Let me know if you have any questions, and good luck!
0 votes
Manager201, Home Buyer, Brooklyn, NY
Sat Dec 7, 2013
What does the seller get from the short sale
0 votes
Carol Perdew, Agent, Manteca, CA
Mon May 14, 2012
Hello Mary,

Short sales are increasing and are becoming a larger part of our inventory of homes for sale. My experience in representing buyers in short sales transactions is these sales are typically taking 2 – 3 months for short sale approvals from the banks. Short sales are usually a longer process in closing escrow.

Sellers that choose to sale their home as a short sale typically do not have money to make repairs on their home. The short sale bank will not provide for repairs so normally short sale transactions are sold in as is condition. Buyers may have to make some repairs in exchange for a home priced at a good value.

Thanks,
Carol Perdew
Prudential California Realty
(209) 239-7979
Carol@PerdewHomes.com
http://www.CentralValleyHomes.com
DRE 985176
0 votes
Natalie Dean, Agent, ANNAPOLIS, MD
Mon May 14, 2012
Short Sales can be great deals! However they are not for the faint of heart. They invariably take time- the buyer should be prepared for 6month waiting period. It is very possible that it could end sooner but even when working with a team of short sale negotiators fully committed to negotiating every day its a waiting game. I always like to ensure that there is a an attorney involved because of legal ramifications when I am representing the seller. It also should be fully understood by ALL parties that the bank makes the final decision. Yes it can be influenced by the listing agent and selling agents knowledge of the marketplace however the bank is looking for their decision makers to be individuals who have no financial link to the deal--so educate all parties that BPO's will be conducted by area agents. I had a recent BOA SS have a full fledged appraisal done not a BPO and the bank used that to establish value. The buyer needs to also understand that they are normally purchasing AS IS CONDITION property. It helps if they have been approved for a 203k loan because often SS needs work. If you are interested in learning more connect with us we would be happy to assist.
0 votes
Jessica Hood…, Agent, Gambrills, MD
Mon May 14, 2012
Short sales can be a good deal. They usually have to sell within a range of market value so you aren't going to get a huge discount. But you should definitely be compensated for the extra wait time. The most important thing to know is going to be handled from agent to agent. Who are the banks involved? Is the agent or a licensed 3rd party negotiatior (preferrable) handling the sale? If the agent, does he/she have any previous experience with short sales. Your agent can check this in MLS as well. I would say that if you are going the short sale route you should work with a buyers agent who has a history of success with at least 5 sales of this type in the past year.
0 votes
Stephanie Co…, Agent, Dunkirk, MD
Mon May 14, 2012
Short Sales can sometimes be good deals, but there are many things that factor in to a listing price on a short sale that you need to keep in mind. A short sale is a seller trying to sell their home for the current Market Value when their loan amount to be paid off is much higher. Many people who bought in the over inflated housing market now own a home that is upside down on their mortgage. Basically in most cases a short sale is priced to sell in the current market value price with condition of the home taken into consideration when listed. Regardless of the price it is listed at the bank holding the loan has the final say on whether or not they are going to accept the offer at that price. So basically the lender could accept the offer or counter the offer. A short sale on average can take 90 days to close so be prepared to wait a while for an answer from the lender. I would reccommend looking at the prices of both short sale homes and regular re-sale homes in the coommunity you like to see what if any the differencce is in sale prices.
0 votes
Juan Bassett, Agent, Rockville, MD
Mon May 14, 2012
Short sales present a variety of challenges to the buyer, one of which is the additional number of steps in the purchase process which may or may not lead to the actual sale and closing of the property. One positive of course would be the amount of monies that could be saved as a result of favorable lisitng prices.

Each buyer involved should have an extensive consult with their agent to determine the advantages and disadvantages of this type venture.

http://www.newmarylandtownhomes.com
0 votes
Nina Harris, Agent, Williston Park, NY
Mon May 14, 2012
They are very time consuming. If you are looking to purchase a home and would like to move within the next 6 months a short sale is probably not the way to go. With a short sale there is no guarantee that you are going to own the property as anything and everything can happen along the way.
0 votes
Bill Eckler, Agent, Venice, FL
Mon May 14, 2012
Hi Mary,

Short sales are like any other market segment....there can be good deal and not so good deals, there are good opportunities and not so....the process of identifying opportunities comes from knowing the market and being able to distinguish good from the bad.

As far as what buyers should know about these transactions, the basic appreciation that "short sales" are typically not short but take a considerable amount of time and they often result in frustration and great disappointment.

This may soon change, since new regulations will be implemented in mid June that mandate Fannie Mae and Freddie Mac to process and respond to short sale offers within the first 30 days and provide regular updated. This should serve to speed up this cumbersome process and keep potential buyers engaged.

Make sure you are dealing with a personal representative that really knows your local market and truly understands the workings of a short sale. There are many self processed authorities out there that fall far short of having earned their stripes...make sure you are working with someone that can not only "talk the talk but walk the walk."

Good luck,

Bill
0 votes
Mauro Ceschin, Agent, Rockville, MD
Mon May 14, 2012
Hello Mary
They might be a good deal.
Short sale requires time and patience . Professional Assistance from a SFR Realtor is recommended. Good Luck.
0 votes
Molly Carter, Agent, North Bethesda, MD
Mon May 14, 2012
Good morning Mary,

I have recently worked several short sales on both ends successfully. We will be closing on one that went under contract and required two approvals, and will be settled from start to finish in six WEEKS. Another took two and half months. Ninety days is about the average. The key is for your agent to know what kinds of questions to ask the listing agent in helping you determine whether you want to enter a contract with a particular short sale or not. Your agent also needs to be ready to negotiate hard for you because with a significant increase in investors in the market with cash to buy up these properties, you may have some fierce competition depending on your own circumstances. There are contingencies you can build into your offer as well to set up timeframe and keep you from spending money out of pocket needlessly should the sale not be approved by the seller's creditor(s). Give me call. I will be happy to sit down and explain all of this to you and the questions your agent should ask the listing agent prior to putting in an offer.

Regards,
Molly Carter
240-676-1656
Web Reference:  http://MolyyCarter.com
0 votes
GTOptions, , Indian Beach, NC
Mon May 14, 2012
Not every time but are good deals as one has to be very alert and sometimes have to make quick decisions with dealing in the property.
Web Reference:  http://www.gtoptions.com/
0 votes
Charles Bail…, Agent, College Park, MD
Sun May 13, 2012
Short sales can be very good deals. They require patience. They can take several months
0 votes
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