What the name Short Sale implies is a colossal misnomer! It actually has nothing to do with time but rather with price. In a nutshell, the sale price of the property will fall short of the amount owed on the mortgage.
The first time I encountered a Short Sale they were very new to the market and few people had any idea what to expect. I, like many other agents, was naive enough to take the name at its word. Boy was I in for a surprise! Almost 13 months later we went to the settlement table. The buyers had a beautiful home and they got it for a really great price, but theirs was a lucky situation. They were in a position to wait and their patience paid off. Most people don’t have the luxury of spending a year waiting for the property of their dreams.
When there are multiple banks involved, 1st and 2nd mortgages, attorneys feuding over a messy divorce or very inexperienced people facilitating a short sale they can become a quagmire of delays and disappointments.
Contrary to popular belief, a short sale is not a golden opportunity to get a steal of a deal. The bank is going to do their homework and will expect it to sell for somewhere in the realm of reality. They will order a Broker Price Opinion (BPO) or review a Comparative Market Analysis (CMA) to determine the fair market value. They are seldom willing to accept any offer too far below that.
Short Sales can however be an opportunity to get a reasonable bargain over a regular sale but keep in mind that it is a tradeoff. They often need more work or at the very least show far less appealingly than a home being sold in the traditional manner. They are generally more stressful and complicated to negotiate and customarily sellers won’t make any repairs to inspection items found to be faulty.
That said, don’t dismiss them completely. Of course you hear horror stories through all walks of life. How many audiences would be captivated by a report about a complete run-of-the-mill situation? What fun would it be to recount tales where absolutely nothing went wrong? But the uneventful success stories are out there. As Short Sales have become more common, they are also being handled more efficiently. If you are lucky enough to work with the right bank or be blessed with a facilitator who is not only experienced but has bulldog determination, it can be a relatively smooth process and an opportunity to get a home for a very acceptable discount. And let’s be honest, in today’s market, you’re pretty likely to discover that a large percentage of the homes you are interested in, are in fact Short Sales.
When Sir Francis Bacon said ‘Knowledge is Power’, I am fairly sure he didn’t have Short Sales in mind, but this age old quote can certainly be applied here. No need to run for the hills when you hear the term, just be informed. Find out as much as possible about the circumstances surrounding the transaction, and adjust your expectations accordingly. It might be a great opportunity.
