short sale (noun): A type of home sale in which the owner owes more to the bank than the home is worth in the real estate market. Not to be confused with "quick sale."
Short sales. They're a great way to get a deal on a home, but you pay. Oh boy, do you pay! There are quick short sales where the bank has their deal together and you can obtain short sale approval in as little as 30 days, but those are few and far between. When you're dealing with bigger banks (who shall remain nameless unless you want to call me and ask me which ones I personally despise working with) there's a great deal of waiting involved in the process. For a great description of the different types of home sales and options, check out my post.
Sometimes you're waiting as a buyer for the greater part of a year, hoping to snag a habitable home for under market value. There are many buyers who will not or can not wait that long. I have a buyer currently who is in this type of situation. She was priced out of the market for standard sales, and every REO we visited needed significant work. We spent months (seriously, months!) searching for a home that would pass FHA standards in her price range. When we finally found a short sale, we were ecstatic that they accepted our offer. We expected the bank to go up on the price after the appraisal and they did...5 months later. They countered my buyer at $15,000 above our contract price. A little steep, but again we sort of anticipated it as a price for getting a home still well below market value.
But then the bank still wouldn't approve the short sale. We had to wait an additional 4 months for the bank to order a second appraisal and try to come back within $10,000 of full market value. Now, follow what I'm saying. The bank's logic is that my buyer wait 9 months (now 10) to pay nearly full price for a home. Who in their right minds would do that?! Well, that's what we're trying to show the bank.
There are drawbacks...
When you're "negotiating" with a bank, (which is illegal in the state of Maryland, technically you have a professional short sale facilitator -read attorney- who is negotiating the short sale for you) you have very few options. They call the shots. Whoever happens to run across that file this week at the bank decides your buyers' fate. The departments are rarely organized, and are usually so crazy busy that your file gets pushed to the wayside for months at a time. I've been involved in short sales where you had 4-5 different processors at the bank assigned to your file. All this so a seller who bought too high in the market can do the right thing by staying in communication with the bank to sell before the property goes to foreclosure. Because who really wins if the house ends up vacant?
Benefits of waiting on a Short Sale...
All this said, there are a couple of scenarios where it actually benefits a buyer to wait on a short sale. They could be living with family and can afford the wait in order to pay less. Or most of the time short sales are maintained by the owner, so you have someone to talk to about the home instead of walking in to a vacant foreclosure with no idea of how the property has been maintained over the years. I even had a couple recently purchase a gorgeous colonial via short sale and were able to pay $25,000 less than market value by being patient for the 5 months it took to get approval. We even recommend short sales for buyers who (in very specific situations only) need the extra time to save up down payment or closing costs.
So that's my little venting session on short sales. If you think this sounds like an adventure you'd like to take (or if you're a gambler) then short sales may be for you! If not, we can go over a plan to help you get the most home for your $$ without having to go the short sale route. Feel free to give me a call to discuss anytime.
Lanham MD Homes for Sale - Genna Fleming, REALTOR® at EXIT ELITE REALTY
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