Re-posted from http://memphisrealestatebuzz.com
Second only to Foreclosures, Short Sales create a lot of buzz among investors and home buyers looking for the almighty good deal. A short sale is a property that is sold for less than is owed on it. Pretty simple concept: you bought a house for $200,000 in 2004, with 10% down. Over the years you pay down your $180,000 mortgage to $160,000. Then for one reason or another… say, you lose your source of income, you REALLY need to sell. BUT, because of the current housing market, your house is now only worth $130,000. A tough pill to swallow, but you have to unload the house. Well it beats having a foreclosure on my credit report. But what about the $30K difference? How will I come up with that money? Welcome to the world of Short Sales.
Jay Thompson, The Phoenix Real Estate Guy, wrote one of the most concise and informative posts on short sales that I have read, so I will skip the mechanics here and just say that the banks, being the altruistic entities that are, just love negotiating short sales with distressed owners, and what they love even more is working offers from buyers expecting a deal. Maybe love is the wrong word, as it implies some human element. The banks are not human, even though there is an interface with an Asset Manager, who, supposedly can make decisions. Human decisions can be measured in milliseconds, but bank decisions can take weeks. The bank does not care if your buyer’s loan lock or lease is running out, or even if she is a well-healed investor paying cash. It’s the bank’s way or no way. Oh, and if there is a second mortgage, double the trouble, because in a short sale, as opposed to a foreclosure, subordinate mortgage holders get a piece of the action too.
I closed my first short sale this month. My buyer clients fit all the criteria for Successful Short Sale Buyers:
1. They were not in a hurry to close
2. They could have and would have walked away from the deal at any time.
3. They had a very high tolerance for the erratic and inexplicable behavior of the bank.
4. They stood their ground when the bank’s foreclosure representative tried to squeeze a fee out of them for delaying a foreclosure auction (the bank backed down and canceled foreclosure sales- twice).
5. Their lender was flexible and helpful throughout the process.
So, for a purchase project started before Halloween with me preparing them for the process, Dave and Phoebe were rewarded with a really good deal on one of the largest homes in their neighborhood. Was it easy? Was it worth it? Let them tell you.