What is a “Short Sale” & should I purchase one?
The following was taken from an article written by Sanford Nax of the Fresno Bee in California. It gives some great information about short sales and want to share it with you. I have a few comments following the article.
“The number of troubled homeowners able to sell their houses for less than their debt on the property is increasing. It’s called short selling and comes as lenders, overwhelmed with foreclosures, are more willing to make deals, and as real estate agents become more skilled in navigating the complicated transactions.
A short sale is often treated as an option to avoid foreclosure. A homeowner can no longer afford the mortgage for whatever reason-perhaps the interest reset because it was one of many variable-interest mortgages approved by lenders-so he or she decides to negotiate with the bank to sell the property before foreclosure occurs.
The seller accepts an offer subject to bank approval and requests a short-sale package from the lender. That package consists of paperwork required from the seller that points to financial hardship. If accepted, the bank writes off the loss-assuming the homeowner owes more than what the house sells for-at the close of escrow as a cost of doing business. This process can be difficult, time-consuming and frustrating. By some estimates, fewer than 10% of all short-sale attempts succeed, although Realtors expect that percentage to increase.
A typical short sale often includes real estate agents representing buyer and seller, a negotiator who decides the price and a third agent who presents an independent value.
And because banks are often under-staffed and overworked, paperwork is sometimes lost or directed to the wrong person. “In the two I’m working, the bank lost the offers twice,” Neufeld said. “Then they have to input it into the system and that can take three to four weeks. Then they have to appoint a negotiator,” which may not happen for a month into the process.
Buyers often get frustrated and buy another property simply because of the time it takes just to get approval for the sale form a bank.
That said, more lenders are willing to consider short sales to avoid any more losses. “Banks are finally getting religion and maybe catching onto the program,” Neufeld said.
In many cases a short sale may be the best solution. The seller lessens the damage to his or her credit and banks don’t have to carry an asset that is continuing to lose value.”Short sales present some really fantastic opportunities for home buyers. The banks don’t want to have another foreclosure on their hands, and the sellers aren’t going to make money in selling, so they don’t usually care what they sell it for. But, the buyers need to be fully aware what they are getting themselves into and what could potentially happen.They also need to make sure they have a Real Estate Agent that is experienced and skilled in short sales. If they are not, it could prove very bad for the buyers and the agent. If you are considering buying a short sale, make sure you are aware of the costs involved and the time frames that need to be set. It is not a quick process, usually.
As for short sales in the Chester County, Downingtown, Exton, West Chester area – there are opportunities out there. Contact me to get my “Top 10 steals in Chester County” list or to set up a custom search for you.
