I am continuing with short sales in many of my blogs due to the continuing confusion about them completely understandable. There seems to be so much misinformation floating around about them. Not to mention the amount of calls and emails I receive from both buyers and sellers wanting information. They usually begin with I heard from my friend or read some where about x, is that true?
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a buyer vs. a seller. Below is a basic outline of what I typically cover with a buyer when we sit down the first time to discuss the buying process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are.
When we are talking about a short sale, we are not talking about a bank-owned property. A short sale occurs when the proceeds of a home sale will not be sufficient to fully repay the seller’s creditors. Because the creditors cannot be paid in full, the seller will need to obtain an agreement from the creditors that they will accept something less than what they are owed. While it is possible to get a good deal on the price of a short sale property, there are a number of issues unique to short sales that are worth considering:
First and foremost, you typically need to have a lot of patience when trying to purchase via short sale. Even though you may have signed a purchase agreement with the seller, it will take some time before you know whether the transaction will close. It can easily take 30-60 days to get a lender to respond to a request for a short sale. It may take longer. And there are sometimes multiple creditors from whom approval will be needed. This can further extend the wait time.
Many short sales are not approved. Just because you might have the highest offer for the property does not mean that it will be approved by the lender. Many purchase agreements fail because the lender chooses not to approve the short sale or because the lender grants approval on terms unacceptable to the seller.
You could have expenses that are not reimbursed. For example, if you incur the costs of an inspection or an appraisal prior to creditor approval, you will typically not be able to recover those expenses.
Unless otherwise agreed in the purchase agreement, the seller may accept offers that come in after your offer. Just because you had the first offer that was accepted by the seller does not mean that you have a superior right to the property. All purchase agreements will typically be contingent on bank approval, and the bank will approve only one, normally the highest and best offer.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
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