A short sale is a sale of a home that is worth less than the mortgage owed. Because these properties are often listed at a price lower than their values, you may be able to get a good deal, if you have a tremendous amount of patience. The problem is that the only motivated people in the transaction are the agents and the buyer. If you decide to make an offer on a short sale, it will generally be submitted by your agent to the seller for acceptance, subject to the short sale lender’s approval. This can take months, so I tell the buyers, “This will take a lot of time, so don’t call me up, whining about it.” There really is nothing you can do to speed up their decision.
It is very important to structure the purchase contract such that it gives the buyer an out of the contract if an acceptance is not obtained within a certain time-frame. Also, it is best to have the different time-frames for inspections, putting the deposit into escrow, obtaining the loan, and so on begin at lender approval of the deal rather than at seller’s acceptance. We have a very good short sale addendum that is required for every short sale transaction.
It is very important to have a short-sale property inspected by a professional home inspector. Many times the upside-down seller has not maintained the property. Very rarely will the short-sale lender agree to pay for any repairs, so it is a good idea to get a contractor’s bid to repair the items so you will know if the cost is unaffordable.
The short-sale lender will come after the buyer and the agent for money. One of my buyers said, “Tell them to go pound sand!” The lender stopped asking him, but then they came after me for some the commission. If there is more than one lender, the sale is even more tedious. Unless the lender in first position comes out with what is expected, they will try to cut down on proceeds going to the junior lien holders.
Someone purchasing a short-sale property should just be prepared and patient and don’t get mad (they don’t care!) and a good agent comes in handy, too.
