Buying a Short Sale
People are talking about short sales and there’s a reason. A large portion of the properties listed for sale in
almost every neighborhood in Snohomish County are short sale listings. Asking prices are sometimes unrealistic
and are often below regular sales and sometimes even below foreclosed properties.
As attractive as a short sale property can be – you must be aware…
This is not your typical real estate transaction. The Seller owes more on the property than they can sell it for and are
trying the get the lender or lenders to take a loss instead of foreclosing. Many Buyers could be disappointed because
the sellers lender may reject the price or counter offer at a much higher price which may not happen until months into
the transaction. Some buyers think these are realistic prices and are not aware of the risk that the price may ultimately
be adjusted upwards. Another thing to be aware of, is the seller may reject the terms of the lenders short sale approval
causing the transaction to fail. Sometimes, a buyer may be required to pay for inspections before the sellers lender approves
the short sale. This money is non refundable if the transaction fails.
How do other types of debt affect the short sale outcome and slow down the process? Many short-sale sellers are
more than just “house-poor.” Some have additional debts, a 2nd lender, tax liens, medical liens, mechanic’s liens, HOA
liens, & child support judgments. These liens must be cleared before the short sale transaction can be closed. It will take
time to get approval for these additional debts.
Make a reasonable offer. Before the lender accepts the price you are offering, they obtain an appraisal or Broker’s
Price Opinion (BPO), the value used by the lender and their investors as the property’s potential sale price. The sellers
lender does not care what the seller agreed to sell it to you for. Remember, every dollar the bank accepts under the
original loan amount is a loss for them.
How long does it take for a bank to approve a short sale? This is the million-dollar question. While it takes an average
of two to six months, the time and the process vary from one bank to another. Short sale approval times depend on
the bank (some just take longer than others). Each bank has different short sale guidelines, the short sale has to make
sense to the bank. The more sense the short sale offer makes to the bank, the faster the approval process.
Will the bank make repairs to the property? The short answer is, probably not. The bank does not have ownership
of the property and has no authority to make repairs on behalf of the seller. Most short-sale sellers do not have the
financial means to make repairs. Many banks require the short sale property to be sold strictly “as-is” and do not allow
the seller to pay any repairs. A short sale is a sticky situation for a bank, and they want to avoid potential liability. For
example, if the bank allowed the seller to make repairs and the repairs proved to be faulty, the buyer might potentially
hold the bank liable, since the seller doesn’t have money (which is how the short-sale situation came about in the first
place).
A Short Sale is a “business transaction” in which you pay with patience for the money you are saving. Many things
can go wrong or get delayed in the process. Be prepared that even at the very last minute the transaction may fail.
Please don’t get attached to the property.
We have successfully closed Short Sale transactions for both Sellers and Buyers, they are challenging and everyone
should be prepared for these challenges. Please give us a call if you have questions. 425-750-2393
