What is the difference between a typical sale and a short sale of an apartment building? Why do short sales tend to be so much less expensive?

Asked by Amynyc, Upper East Side, New York, NY Mon Apr 5, 2010

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Lindsey Newman’s answer
Lindsey Newm…, Agent, New York, NY
Fri Jan 13, 2012
You have received very informative answers thus far. At the present time, I have a working relationship with a Seller's Broker, in order to represent the buyer, with their short sale property in the upper east side of Manhattan; so I speak from a point of real-world experience on this topic. I want to add something and emphasize a point that most apartment buyers don't seem to realize when apartment hunting. This info can wind up saving you a significant amount of money, and in the case of a short sale, time...

When you look at apartments that are on the market, and advertised as short sale opportunities, you really have to have your "comparable" homework done. The prices of apartments in a particular building, and neighborhood, will vary greatly. If you find a short sale situation, by way of the Internet in the form of ads placed by the owner, Real Estate Broker or bank, they will do very little, if anything, in order to help you discover the true value of the property. You therefore need to protect yourself by having your own representation, in the form of a Buyer's Agent. Just keep in mind that there is no cost to you associated with having your own Buyer's Agent, because the seller pays the entire commission.

Lindsey Newman
Senior Real Estate Sale Associate
1 vote
Maria Avella…, Agent, LAUREL, MD
Sat Apr 10, 2010
A Short sale is an alternative to foreclosure in where the owner gets to sale a home that is upside down. Owns substially more that what is worth. The sale has to be made with a third party approval meaning the lender, who agrees to take a lose on the transaction. Some lenders might hold the owner resposible for the difference and attempt to get a judgement or promisory note from the owner to recoupe its lose.

The short sale process is very long though with the new Gov program to streamline then, HAFA, is suppose to get much shorter and have clear and cut deadlines for each step of the process. It aslo provides for no judgements against owners

One significant difference for the owner is that the credit doesn't suffer as much as it will from a foreclosure.

Another advantage from a short sale is that keeps vvacant properties to a minimum in communites preserving values and reducing crime risks. 908240-7702 WA -Balt - MD
0 votes
Mitchell Hall, Agent, New York, NY
Mon Apr 5, 2010
Short sales are anything but short. The take a long time. As a buyer you can make an offer and you may not get a response for months. Short sales benefit sellers as a last resort before foreclosure.

Most short sales in Manhattan are in new condos. Buyer's typically bought during pre-construction and paid too much with little down and high mortgage and monthly fees. The market turned and so did their financial situation.

As Anna said they are not all such great bargains. In fact I have seen buildings with several units for sale. I've seen short sales priced higher than non short sales. If the sponsor/developer still has some units available for sale that is where you will find the best deals although you wouldn't know that from their listing prices.

A good local buyer's agent knows what developers/sponsors are willing to deal and knows how to negotiate with them.

Mitchell Hall
Associate Broker
The Corcoran Group
Web Reference:  http://nycblogestate.com
0 votes
Jenet Levy, Agent, New York, NY
Mon Apr 5, 2010
A short sale is a very different animal than a regular sale. The owner can no longer afford the payments, and what the property is currently worth is less than what is owed to the bank on the property. Therefore what they could sell it for is still short (hence the name "short sale") what is owed to the bank. The bank has to agree to this. The reason it is a lengthy process is because of the level of involvement of the seller's bank and all their red tape. The bank is really in the driver's seat ina short sale. When an offer is placed, the waiting period can be quite long to hear anything back.

Jenet Levy
Halstead Property, LLC
212 381-4268
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Apr 5, 2010
A short sale occurs when there is financial hardship--the mortgage against the property is more than what the property can be sold for--the lender agrees to accept less than the amount owed--the seller can accept any offer he/she wishes, however the lender decides to accept, reject or at times counter offer; not all short sales are such great bargains; some are listed on target for today's maket or slightly below to encourage multiple bids; short sales do take longer to close than a traditional sale--a typical sale is a regular sale, the seller can accept any offer he/she wishes and no lender approval is needed in order for the sale to proceed with his/her buyer(s)..
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