Short sale — annoying process but a good opportunity . . . sometimes.
While working with my clients in a variety of purchase scenarios (bank-owned foreclosures, short sales, distressed sales, and normal/seller-direct purchases), we’ve found the “short sale” transaction to be the most confounding.
In a short sale, the seller of the home must sign off on the sale, which is the easy part. Then his/her lender must also approve the price and terms of the purchase which, by definition, brings in purchase proceeds below the amount of the outstanding mortgage loan. For example, if the property is sold for $150,000 and the owner/mortgagee owes $160,000 on the mortgage, they are in a short sale predicament. The lender has to look at the overall strategy and comparable sales for the area and decide (often by committee) whether to sell at a loss and write off the loss, or to proceed with foreclosure and take over ownership of the property and then hope to sell at a price higher than the current offer. This rarely works out well for the bank, since values typically drop on the property once it has been foreclosed upon and vacated, perhaps sustaining damage along the way.
It’s frustrating for the buyer/client who has to wait weeks for an answer on the first offer and any subsequent offers. He’s going through two layers of respondees — the current owner, then that owner’s lender.
If you’re patient however, you can get a good deal on a property and get a home that has been lived in recently, thus expecting that all major systems function fairly well and vandals haven’t destroyed part of the home.