The truth about "Short" Sales

Broker Bridget is provided by Bridge Coast Realty brokerbridget@gmail.com

What is a short sale?



A short sale is a listing where the the seller owes more money on the property than it is currently worth. They must ask the bank to take the loss. As a buyer, you have to negotiate with both the bank and the seller.



Here we are in another month of increase foreclosures (REOs) and yet we continue to write offers on short sales. However, only a relatively small # of all short sales actually close escrow. The rest go to foreclosure or back to the current owner. I'm sure by now you have heard about how difficult they are. Perhaps you've heard they can take anywhere from 2-6 months (or longer) just to get approved, and then you go into escrow. Maybe you have even heard that even with "lender approval" they can still reject offers at the approved price.



However, what you may have not heard is the buyers perspective. In this market, it is not uncommon to see the short sales listed at "deal prices" The agents collect multiple offers and submit to the bank. However, the bank doesn't have to take the offers (even ones that are way above list price or at current market value).



The bank must approve the property and the seller for a short sale. The seller must prove financial hardship. So what does that mean for you as a buyer? It means that even if you are an "A paper" buyer, you could still get rejected.



To understand a short sale, you must look at it from the banks prospective. They don't want to lose money, but banks certainly don't want the home to go into foreclosure, where they'll lose even more money. (This is why loan modifications have become popular over the last 6 months.) However, the banks only have so much man power to handle the flood of new short sales and foreclosures each month. They have asset management departments in house or have hired outside management companies. Bank owned properties go to the top of their pile (they usually respond within 1-5 days) while short sales typically take a lot longer.



My advice to potential buyers: if you can, stay away from them. If you don't have that luxury, work with a good realtor/broker who can help you make the best decision. Its not common to work with a listing agent directly either because they are received many offers on the same property. How can they represent you as well?



The homebuying process isn't what it used to be. Its time to re-acclimate yourself with the new market.



There are plenty of good buys out there, you just need to know where to look!







If you have any questions, please feel free to email me at