Short Sales

“Short” sales are, in a nutshell, sales where a lender has agreed to take less than it is owed on a property.  These can have the effect of avoiding a foreclosure for the homeowner, while possibly facilitating a good deal for an investor or homebuyer.

There are definitely some pitfalls in dealing with short sales.  As a seller, because this is a consensual process, all lenders (first, second, HELOC, etc.) must generally agree.  Why would they agree?  For most, it is only to avoid having an additional house on their books which needs to be placed on the market, possibly hurting the value of their other assets in the neighborhood, and causing a lot of headaches for the bank’s asset managers.  This becomes trickier the more lenders are involved, as the higher level lenders have less incentive to agree – since they may be completely wiped out.  (At least the lowest level lender will recover some value for the collateral.)  There are sometimes ways to negotiate deals even with multiple lenders, so please give me a call if you’d like help assisting you.  You must take into account potential tax and credit rating implications.  As always, I only get paid if I can negotiate something that is acceptable to all parties.

On the buyer’s side, there are also some potential pitfalls and opportunities.  Perhaps the biggest pitfall is how long it can take asset managers to agree to a short sale.  Many investors are going around town and making offers on short sales, and just moving on to the next one immediately, and keeping several offers on the table.  If they get one; great.  If not, the just go right along writing offers.  Of course, all the usual due diligence items are important when buying a short sale property – don’t neglect a professional inspection just because the property “seems” cheap.  Even when these are listed as “approved” short sales, it does not mean the bank will jump on your offer – more typically they will drag their feet a bit, and possibly try to scare up some higher offers.