What Is a Short Sale?

Everyone seems to be talking about short sales, but many buyers don’t know exactly what a short sale is. Currently, there are 49 homes and 11 condos being offered as short sales in the Branson/Tri-Lakes area. To me, “short sale” is an oxymoron… They should be called a “long-drawn-out-miserable sale”. The most common misconception is that “short” refers to the amount of time to close the transaction. In fact, “short” relates to the shortage between the current market value of the home and what the seller owes the bank. In other words, the seller’s mortgage payoff is $200,000, but they have the home listed at current market value for $175,000. Rather than make up the $25,000 difference at closing, the seller is trying to convince the bank to eat the loss. Yum!

So, here’s a quick overview of how a short sale transaction works…

  1. Buyer makes offer on the property.
  2. Seller “accepts”, but this is subject to the bank approving the deal.
  3. Bank takes forever to decide.
  4. Bank draws things out a little longer.
  5. Everyone gets frustrated.
  6. Buyer eventually gives up.

Ok, so I’m being a bit facetious, but you get the idea. Generally, I’m not a fan of short sale transactions because I believe there’s usually a better buy out there with a seller that has the power to actually sell the property without having to get someone else’s approval.

Now, there are times when I think a short sale can work and is worth the trouble. For instance, sometimes the seller and their listing agent have obtained approval for the short sale from their bank in advance. Great! That can definitely work. It also depends on a number of other factors:

  • Is the seller likely to get approved for a short sale?
  • What bank is making the decision? (Some banks are notoriously slow)
  • Does the listing agent have experience/education with short sales? (This is a BIG one)
  • Is the seller going to be cooperative with the bank?
  • Does the seller have the property priced correctly?

If you’re considering purchasing a short sale, make sure you know exactly what goes into it, and be sure that you are patient enough. I have had several buyers that thought they were up to it, but about 30 days in, they decided it was just too much trouble and there were other opportunities out there they could be taking advantage of.

Questions? Post away in the comments below… You can also call me any time. 866-264-2803 ext 703.

Comments

  1. Fred Elliott says:

    Thank you for the information on a shortsale, I did not know what it consisted of. I would not be interested in doing one of those. Thank you

Speak Your Mind

*

God cares about honesty in the workplace; your business is his business. Proverbs 16:11 (MSG)