Everyone loves a great deal, and a short sale might be a way to get a great deal, BUT not without challenges!
A “Short Sale” is one where the bank must agree to take a lesser amount than they are owed for the home. Usually the seller is behind in their payments, and on their way to foreclosure. The bank knows that it costs a lot of money (and time) to foreclose on a property so they are sometimes willing to compromise. Typically these homes are in need of many repairs.
A lot of people want to look at Short Sale homes because they want a great deal, and they are willing to do the work to bring the house up to their standards. It can be instant equity if done right.
What a lot of people don’t know is that a short sale is incredibly slow and cumbersome. The bank needs to know for sure that there is a real hardship and that the seller can no longer pay for the home. They usually try to get the seller to sign a note saying that they will pay back the shortfall. They need to look at your bank statements, they need to know the value of your house, they ask a ton of questions. And once you have sent all of the information in, they might lose it and need everything sent again (2 or 3 times).
Once a buyer comes along and makes an offer the bank can take what seems like an eternity to make a decision! They need to have the house appraised. They need to talk to the investor who is backing the mortgage, they need to re-verify that the seller can’t make the payments. They need to check with 2nd or 3rd lein holders. It is shocking how what seems like should be a simple decision can take so long. You need to realize though, that you might be file #692 on someone’s desk. Someone who just doesn’t really care about your timeline.
Buyers always say they are going to be patient, they are ok with waiting, they are in no big rush. Until we haven’t heard anything from the bank for 2 weeks, and then 5 weeks, and then it’s been 7 weeks. . .
Things I have seen in Short Sales:
- the sellers trash the place out of anger at losing their house
- sometimes the houses get broken into and theives steal the appliances, the copper pipes, anything that they can re-sell
- I’ve seen homes where a back window is broken out and the rain, the raccoons, anything can get in
- I’ve seen homes vandalized and used as a comfy place to sleep
- I’ve heard of a situation where there was an offer on the house, and the buyer was waiting for an answer from the bank. It was a full price offer… but the bank foreclosed anyway, went and changed the locks, and took the house back.
- Homes with basements often flood, because the bank turns the electricity off, which means the sump pump can’t work. Then the mold can start to grow.
I am waiting on the yes or no answer from 2 banks right now, and the lack of communication can be infuriating for the buyers. You just want to pull your hair out and scream, “JUST LOOK AT OUR FILE!!!” but there is nothing that can be done to move things along.
Before you consider a short sale, be sure you understand what you are getting yourself into.