Short Sales

Short sales are very hard to read, and are not always a good deal. Let me try to explain the process. In order to sell property as a "short sale"...the owner must "qualify". In order to "qualify", they (the owner) must submit documentation (bank statements, financial statements, tax returns, etc) proving that they can no longer afford their mortgage. A "short sale" is an attempt by the owner to sell the property short of foreclosure AND what they owe. In order to get the lender to look at the "short sale", they need to submit an offer from someone willing to purchase the property. Therefore, the primary motivation of the owner and the listing agent is to get the initial offer...NOT listing the property at market value. After the lender gets the initial offer (and the owner's financial statements), the lender orders an appraisal and BPOs (this is where the lender asks a few Realtors in the area how much the Realtor thinks the property is worth). This process takes 2-6 weeks...to just get an approval! After the approval, they must now accept an offer from a buyer. After they accept an offer, escrow is opened, which typically last 30 days.

Short sales are not necessarily a good deal because...1.) they are often listed below market value and banks are typically trying to sell the property for approximately market value, 2.) you are agreeing to a price on a property 10 weeks before closing the transaction. This can cause 2 problems, 1.) the buyers lender may not approve of the deal after that much time (interest rates may rise, loan programs may go away), 2.) the buyer is agreeing to a price on a property 10 weeks before it may close escrow (in a declining market the home may actually be worth significantly less before escrow closes).

The primary thing to be considered when making an offer on a short sale is the market value of the property NOT the list price.