The skinny on a "short sale"

There is so much talk and "hype" out there in the market about foreclosures and short sales. There are tons of opinions one thing I can tell you is that they are probably more popular than they should be. Short sale is the new “buzz” word for foreclosure or distressed sale. A short sale is basically when a house is sold for less than what is owed on it and the proceeds from the sale fall “short” of retiring the debt and encumbrances on the property. In order for the sale to be approved and eventually closed, the seller, and more importantly the bank have to agree on all of the terms and conditions of the sale. It is a slow and aggravating process a lot of times but there are some deals that can be had out there on a short sale.

I have been involved in short sales on both sides of the transaction- I have represented buyers and I have represented the bank as the seller. The reason a property gets involved in a short sale is the same reason for a foreclosure. Generally, the current owner can’t make the payments and a short while back this would have led to foreclosure. However, with the high number of foreclosures, banks are letting owners stay longer and they are trying to short sale the property out from under the owner as they would rather take a one time loss from a short sale rather than go on to and eventually through the foreclosure process- it’s really a short cut! This ultimately leads to one of the pitfalls and that is owners/sellers that are getting booted out through a foreclosure or short sale sometimes run down the property and even if you get a “deal” the home may not be in decent condition. Furthermore, banks are generally reluctant to do repairs or give repair allowances thus leaving you, the buyer responsible for getting the house “up to snuff”. One more thing is that due to the negative stigma of the foreclosures and short sales, a lot of them are not disclosed openly and you have to dig to find them.

I have found that in this market, if you are patient you can find deals out there in all types of purchases. You don’t have to seek out short sales and foreclosures just to get a house below market and in addition, the transaction has a lot less hair on it! I have been surprised at some of the transactions that I have been involved with and it is a great time to buying a home period.