Short Sales are Anything but Short! And you Better know what YOU are getting into. Before looking at the Buyer's pespective, you must understand the Sellers position. For all intents and purposes, short sales, foreclosures & pre-foreclosures are all the same. The owner needs to sell & they owe more than the house is worth. Therefore they need the lender(s) approval to sell "short".
Now lenders don't do this out of the goodness of their hearts. Lenders are looking to cut their losses. Which way will they lose less, a Short Sale or a Forclosure?
Sellers can't just do a Short Sale because their property value dropped and they want out. They have to qualify. There must be a real hardship-such as a loss of job, death of partner, major illness AND the Seller doesn't have other assets or financial options. They must also be willing to complete a full financial package for the lender proving it.
House + Mortage+ Promisary Note (=Debt)
Let me make this very clear DEBT DOES NOT DISAPPEAR!
Florida is a recourse state. When a lender releases a Mortgage it merely means they are releasing the vehicle that secures the NOTE to the house. With the mortage released, they can sell the house, but the note is still there. It just doesn't have the house for collateral. A licensed Mortgage broker & an attorney can legally negotiate the debt. The attorney's task is to negotiate the debt down as low as possible.
Many banks are trying to streamline the process. Part of the problem is every lender has different requirements. IF there is only one lender & the seller qualifies the chances of closing are good. Two lenders or a lender and an HOA and the chances go down...3 or more liens...Buyers you should RUN!
What does it mean if you are the Buyer? Sit down and have a consultation with your Professional Realtor. If they don't do this...maybe you should find one that does.
Make sure your agent checks out the Short Sale before you even go looking... remember 3 or more liens...what do you do...RUN!)
If you have time contraints, you must be in a home by a certain date...don't do a Short Sale!
Once you and the Seller agree on terms and have a ratified contract it will take the first lender 45+ days to respond. Most lenders want agents to put 90-120 days in the contract. If it closes in 2-3 months, that is excellent. It could be 6 months plus AND even with a FULL PRICE offer the lender may come back and counter with higher OR just say NO. There are no guarantees. The Lender may get more if they foreclose and collect mortgage insurance & then sell it themselves.
As far as pricing...it is based on market value. Lenders were looking to get 88-93% of market value...now we are seeing many want 93%+ even closer to market value.
Once the first lender agrees, the process begins again with the second lender..who usually doesn't get more than $3000 compensation regardless of the loan amount....which is why the 2nd lenders are often the deal killers. Sometimes the seller is the Killer...they may have been living in the house for a year or more paying nothing & maintaining nothing, the lien holders agree, but won't negotiate the debt down to zero, thus the Seller backs out of the deal. The Buyer might not find this out till 6 months down the road..Short Sales are like raffles..You MIGHT be a winner.
Everbody wants a deal...what do you do as a Buyer? Don't limit your options...in this BUYERS MARKET...the market value IS an "On Sale" price, whether a Short Sale, REO or regular priced house with a motivated seller.. REMEMBER a short sale is anything but Short!
Broker Associate, GRI, SFR, NHS
Real Estate Consulting, Marketing & Sales
Prudential Tropical Realty
2539 Countryside Blvd #3 Clearwater, FL 33761