Foreclosure in South Side>Question Details

Mrsvero, Home Buyer in sourthside

Can you please explain what is a short sale? Also sellers owe money to two banks and a surprise lien.

Asked by Mrsvero, sourthside Tue Feb 26, 2008

My husband and I are trying to purchase a short sale house. We have started on the paperwork and should be closing by the end of the month. Well, today we found out that there is a lien on the house. What I am wanting to know is if the sellers cant pay what they owe to whomever, does the house go into foreclosure? Also, we have started the paperwork could we the buyers still get this house? What are my options here?? We have been trying to get this house already for a month. Should we give up and look for another house or is there still possibility that we can get this house?

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A short sale is when the seller wants to sell the house for less than what they owe and do not have the funds to make up the difference. They want the bank to allow the sale and either work out alternative arrangements or have the bank forgive the difference. These very rarely close quickly and typically you must have much patience to make it work. Sometimes it will take months and not work out.
By default if you are buying a house as a short sale there is at least one lien on the house. Just because it is a short sale does not mean it will go into foreclosure. Sometimes the owner will stay there paying until prices go back up. They want to move, but won't move until they don't have to pay out of pocket. Now if they aren't paying the mortgage now, then at some point it will go into foreclosure. If you have started paperwork it is possible you could get the house, but will likely take some months. The department your seller is dealing with now, is a totally different department than the REO department that handles foreclosures in many cases, unless it is a very small bank. If it is a big bank/lender like BofA, Countrywide, etc then they'll be different people and different departments and I'd be surprised if they talk. Also it could be months before it goes to foreclosure and comes out where you can buy it.
My thought is if you really need to move at the end of the month, then you might look at another house. Your agent should be able to give you an idea on how to proceed.
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2 votes Thank Flag Link Tue Feb 26, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
A short sale is what my husband and I did on a home about 4 years ago. You will get the home cheaper that what the owner owes on the home it affects you none at all. Only the seller. Our credit show we paid our home off but on a short sell meaning the bank agree to take less than what the owner owes. The bank will have the home appraised. And go on that selling price. And they only have 90 days to sell the home before losing it. GOOD LUCK IN YOUR NEW HOME
1 vote Thank Flag Link Thu Oct 15, 2009
In order for pass clear title, all liens must be released. The lien holders are either paid in full, or agree to accept a lesser amount to release the lien they hold. Not unless all liens are cleared, can a clear title pass. If a buyer is financing a property, the lender will require clear title in order to fund the buyer's loan.

It takes much time and endless patience to see a short sale through. There is no predictability and banks do not make decisions rationally.

If the amount you are willing to pay is less than the collective acceptances and approvals of all lien holders, it won't work.

A bank can also abandon your offer in favor of another if one comes in a few thousand higher than yours. Be prepared for surprises.......and be patient.

If you are lacking in time or patience, a short sale might not be the route for you.
1 vote Thank Flag Link Tue Feb 26, 2008
Deborah Madey, Real Estate Pro in Brick, NJ

Bruce and Deborah have already given you great definitions of what a short sale is. So since they've already done the hard work here, just let me add my two polished cents....

Short sales can be GREAT deals or more often lately, they are just pain in the butt houses that were financed over 100 LTV anyway and all the work you're putting into it may not be worth it... I've had clients think that ALL short sales meant GREAT deals... WRONG! Just make sure you're ready for patience....
I had a client wait for about a month to get back to us on a short sale only to find out that we were replaced by another offer that was a couple grand higher... very frustrating.... If you're not emotionally committed to the deal... then you're ready for short sales!
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0 votes Thank Flag Link Wed Feb 27, 2008
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