WHAT IS A SHORT SALE

Question

What exactly is a short sale? Should I avoid buying short sale homes? If so, why?

Deren Huang · Answer

@Jordan Santiagohttps://www.biggerpockets.com/renewsblog/what-is-a...This is an awesome post about what short sales are.I list short sales as a realtors and HATE them. The process is not up to the buyer or the seller it is up to the bank, and guess what... the banks have a lot of rules. Local banks are easier to deal with but the big ones, BOA/Wells Fargo, I have heard stories of them taking a year or two to approve...I tell people who bid on short sales to bid then forget, if you do get it let it be a pleasant surprise but don't hold your breath!

JD Martin · Answer

The seller owes more than the sales price and the bank agrees to eat the short. So there's a $100k mortgage on the property, the bank agrees to let it run for $80k and writes off the $20k. Short sales can be great deals or they might just be overpriced dogs. Just like any other house. PS: Given that you asked this question, you should reconsider any purchase without more education. That's meant to be serious, because you can seriously lose your ass in RE if you don't know what you are doing.

Jennifer Kinzle · Answer

@Jordan Santiago Check out Fox Valley Short Sales.com for more info (consumer based site). I'm a short sale listing agent and yes, they are a lot of extra paperwork hassle. The average time to close on one is 4-6 months and there are typically deed restrictions to the buyer, causing more headaches, if it is an investment property. Often buyers will walk due to it taking too long. Most banks still haven't figured out that an appraisal value pulled from regular sales doesn't give a true picture what a buyer will pay for on a short sale, and I've had to go through great lengths with value disputes to get them to understand the real picture. I've had as many as 30+ showings and zero offers due to their list price being outrageously high. That being said, some short sales can offer discounts of 20-30% off market price, with some being in great condition. It all depends on the area and the experience of the agent handling the deal. Good luck!

Stone Teran · Answer

Keep in mind that short sales usually take longer to complete than a normal sale because you have the seller's bank involved and they may have a set of certain demands.

Jennifer Kinzle · Answer

@Denise Evans I have found Nationstar is a lot faster on response time than Citizen. I've found them to be willing to listen to me on comps as when I say 30 showings and 0 offers = it's priced too high!. Bottom line is net for them, as long as they get it, they seem to let a lot of things go. On the other hand, Citizen raised the list price by $10K, and cut commissions, which is ridiculous, given the property condition and huge processing delays. So far the buyer is patient, but the once a month file reviews are deal killers.

Denise Evans · Answer

That's interesting @Jennifer Kinzle, I HATE dealing with Nationstar. Maybe I just got some bad eggs. I like Citi, WF, BofA and I LOVE Regions short sales.

Jennifer Kinzle · Answer

@Deren Huang I work with several agents to list short sales and the longest so far was 13 months. I've found Chase, Wells Fargo and Nationstar much easier to deal with in general. Equator is helpful in keeping all parties on track and accountable. When banks do not bother to check their files, I can keep them mostly on track. For example, Citizen bank "approved" the short sale in Oct, but as they only check the file 1x a month, feedback is limited, and we don't know if anything is missing for a very long time. Then it is another 4 week wait to find out if the file moved through underwriting. But, if the buyer is patient, they can get a really good deal. @Denise Evans Yes, the banks have not been interested in any comps for similar distressed sales, they want to see regular comps, even if the property is in poor condition.

Denise Evans · Answer

I had a BofA that took two years, but only because they kept rejecting the offer as too low, we'd appeal the appraisal, the old one expired, then we needed a new one, and so on. But, we were happy with it taking so long. We managed a 5BR/5BA brick home on 2 beautifully landscaped acres down to a $45,000 appraised value, which supported our $40,000 offer.Other than that one, the longest was 5 months, but it was an appraisal dispute also. We got it for our price. They wanted 3 non-distressed sales as comparables. I was able to show that every single sale in the entire condo complex for the prior two years--over three dozen--was a foreclosure or short sale. So, we got that one for the price we wanted.The others typically take 45-60 days, sometimes as long as 75, but that is very rare.

Deren Huang · Answer

@Jennifer KinzleProps to you being a Short Sale agent! What's the longest you've had a short sale? I had a BOA that took a year to do...

JD Martin · Answer

I agree with this. They are a royal pain in the ass from an investor's point of view as well. Every one I have been involved with has been nothing but aggravation.