Short sale homes is a phenomenon that, although not new, came much into the front lines – and into the media headlines -- during the burst of
the real estate bubble circa 2008.
I happen to think that it would be better expressed by short pay, as at times it is also known. It happens when the current owner wants to sell a house whose market value is less than the amount still owed to the original lender…
In turn, the lender has to approve it in order the sale to go through. Because if the sale goes through, it will not generate enough funds to the pay the original loan, in other words, in will come short.
It is never a straight shot as it would be in a “normal/traditional” sale or even as I a foreclosure would.
And those details -- “the devil is always on the details” -- that you need to be well aware before you set your heart in SS home: Please read some more below.
Short Sale Homes Buyer: Expect Delays To Close
Perhaps the first and the foremost thing you need to keep in mind when buying a home in short sale is that you need to allow for plenty of delays.
And unfortunately I do not see any changes in the horizon.
How much delay? A lot! Four months can be considered fast. Five to six months will be the normal. Longer period is possible - and there is no much guarantee on the outcome.
So I need you to be prepared and plan for it.
I specially warn people who have kids in school age as well as people who rent and whose lease will be up rather soon. I think that any kind of delays in closing are inconvenient in many different ways but these two situations can throw a family to the verge of desperation.
A while back, I was representing a couple who was in the market to buy a home. He was retiring from the military and they had a period of time around 90 days to vacate the military housing they were living in.
Most of the houses they liked were short sale homes although there were still many that were not. However, as faith would have it, they decided to put an offer on a short sale thinking that the 90 days period would reasonable for them to close.
Well, around the 45 days mark we had not receive a word from the lender and the buyers started to get nervous.
They would search the internet and send me information about some guidelines the Obama administration had put forth “ordering” the lenders expedite relief to the housing problems.
One piece of info was that lenders would have respond within 10 days to any offers…
Actually that info was not new to me and, at the time, it was already over a year old. Please citation from Reuters, the news website, posted on Monday Nov 30, 2009:
“The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed "short sales" of homes and other loan modification alternatives to stem a rising tide of foreclosures.
Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer,
Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale” Reuters.com
No quick solution
I am standing here to tell you it would have been great if it would be that simple – however short sale homes just do not work fast. Period!
Unfortunately, it never became the norm. And up to this day there is so much red tape that it is not even funny.
The President has a lot of clout in many different levels, but apparently not with home lenders: At the time of this writing which is another additional 2 years since the event of those clients mentioned above, banks still do not comply with that “presidential order.”
Bottom line: If you are contemplating to jump in the short sale homes market, be advised that it will not be quick.
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JC Fagundes, Qualifying Broker
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