Pros & Cons of short sale purchase

Asked by Grace, Torrance, CA Wed Mar 5, 2008

Is it a bad idea to try to purchase a great home as a short sale that has not yet been approved by the bank? What are the pros and cons?

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7
Bill Eckler, Agent, Venice, FL
Thu Mar 12, 2009
Grace,

The pros of a "short sale" is you can save money.

The con of a "short sale" is you may become painfully aware of the meaning of the word eternity.
2 votes
Pacita Dimac…, Agent, Oakland, CA
Mon Apr 14, 2008
When writing an offer on a short sale, one of the first things we ask the listing agent is if the short sale has already been approved by the bank...the waiting time is horrendous. Even when a short sale is approved and there is an offer on the table, it may still take 30 days to get an answer from the Lender who has the final say in whether to approve, reject or counteroffer an offer.

In the meantime, the longer the short sale takes to sell, the closer it gets to being a foreclosure. We've watched some short sales with no activity. Then as soon as it was foreclosed, that's when we made the offer. The response time from the lender was a heck of a lot shorter than a foreclosure.

PROS: If you are successful, you may but the property at a lower price than market. There is room for negotiation (don't expect a lot!)

CONS: Long process. If you don't keep looking at what else is available, you may miss out on a good deal while waiting for a short sale to be approved. Some short sales are still listed at market price, and lenders may be unwilling to negotiate a much lower offer Even if a seller accepts your offer, the final decision rests with the Lender. If other offers better than yours comes in, the Lender may choose the better offer --- and you've just wasted time waiting for a rejection.

Take a look at this link about Buying Foreclosures and Short Sales.

Good luck!
2 votes
Kimberly Lang, Agent, Bonita Springs, FL
Thu Mar 12, 2009
Many banks will not make a decision or even start the process untill there is an offer on the table. When making an offer on a short sale you must has the stomach for a long wait, don't expect an answer in 30 days. Although quick short sales do happen, they are the exception to the rule.

Kevin, One thing to realize is that on a short sale the list price is NOT the bank's price; it is up to the listing agent to determin the approximate market value of the property and list it for that. When there is an offer, the "seller" will almost always sign and thus "accept" the offer because there is little reason for the seller at this point to care what the home sells for. After all of this, the bank must "approve" the offer price. This is where all logic can be thrown out the window.
http://www.SWFloridaHomeSearch.com
1 vote
W.b., Home Buyer, Los Angeles, CA
Tue Mar 25, 2008
I made an offer on a short sale in December. I received a counter offer and accepted the counter. I waited
until March for the bank to approve and then my realtor called me and said the seller's realtor said they'd have an answer the next day - it turned out that the seller's realtor was still taking offers since it wasn't considered an "accepted offer" until the bank approved it. I lost the house to, i guess, a higher offer which was submitted in the meantime, after waiting 3 months. I agree - make sure your realtor is experienced and make sure the paperwork indicates they are taking multiple offers - my paperwork didn't express that but they took others anyway.
1 vote
Dot Chance, Agent, Burbank, CA
Wed Mar 5, 2008
Pros of purchasing a short sale property - you MAY get a great deal!

Cons of purchasing a short sale property - the property will probably be AS IS - no repairs, etc. Another is that it takes a VERY LONG TIME to get an answer from the bank.

I just waited 4 months to get a short sale approved and it was only one bank!

The good news is that we have a listing in Torrance that is just about the price of a short sale without being a short sale!
Web Reference:  http://www.DotChance.com
1 vote
Linda Baker, Agent, Los Gatos, CA
Wed Mar 5, 2008
Hi Grace,
Purchasing a short sale is a great opportunity to buy a home that is under market value, but it requires a great deal of patience. I am currently in a short sale transaction where we have been waiting for over a month for the sellers lender to approve the sale, and there is still a chance that it may not go through.
I spoke to another buyer this weekend, and she was in contract for 4 months before she finally cancelled the contract because the first & second lender kept coming back for more money.
It requires a patient & experienced realtor to guide you through the process. If you need a reference to a great agent in your area, please let me know at 408.712.3432.
Cheers,
Linda Baker, Alain Pinel Realtors, Los Gatos, CA
1 vote
Kevin Miles, Home Buyer, Citrus Heights, CA
Thu Mar 12, 2009
I am currently waiting for an acceptance to an offer put in on January 15th. I overed a little more than the banks asking price but still no word yet and I am getting really frustrated. I am going to put a little heat on my agent tomorrow to get this going. I have had short sale offers go south on me in the past and really want this location.

The information provided is good stuff!
0 votes
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