What to watch for when buying or selling a short sale

Share

Tweet

I have been getting a lot of questions about short sales lately. The first and most obvious question is, ‘What is a short sale?’ The simple definition is this. It is when someone is selling their house for less than they owe. There is a more in depth definition, but it’s like being upside down on your car.

So now that we have that out of the way, I also get a lot of questions about how it works. Here is the most basic explanation: Buyer and Seller agree to terms, once terms are reached the offer is given to the bank for approval, if bank accepts then you close just like a normal transaction. If the bank rejects the offer then you can counter-offer or walk away. As I said, this is putting it in the most simple of terms.

Now, here is how it will affect the sale. TIME TIME TIME!!!! Some banks are on the ball and you can get the entire process done within 60 days or so. However, this is NOT the norm. I have written and submitted many offers that have literally been in the bank’s hands for months. One example I like to give is in February of ’08 I submitted an offer that was then passed on to the bank. In September of ’08 my buyers finally gave up and bought another house without ever getting an answer on the offer. This is not normal either, but it happens!

This is how I suggest handling the purchase of a short sale. If you are dead certain that this is the ONE and only house you want then just be prepared to wait. You have to be ready to wait for months and upon approval you will have to move quickly. It’s an odd little twist on the whole process, in that the bank will make you wait for months to get an answer, and expect you to close within a matter of a couple weeks.

However if you are not dead set on a particular home than by all means write the offer on the home and then continue to look as if that offer never happened. In Oregon we have a ‘Short Sale Addendum’ and with the right verbiage it gives you the opportunity to walk away at any point prior to the bank giving approval. So, just continue to look at homes in the hopes you find one you like better, and if you don’t find anything your short sale should still be plugging along. This is a great way to ensure you actually find a home and don’t wait for months just to get a rejection by the bank.

If you’d like more information on short sales, the process or how I operate just give me a call and I’m happy to answer questions.

-Aaron