A Little Something About Short Sales

Most people, including many agents, don’t understand short sales.  I’ve been asked about this a few times so I thought I’d post a brief answer on how it works.

In a short sale the bank does not own the house.  The owner of the house, the original mortgagee, is listing the house for sale in an attempt to get the bank to settle for something less than the mortgage payoff.   Most, if not all banks in the US, insist that the house is listed with a local real estate agent.  If he can secure a buyer, it might get him (the owner/seller) off the hook for the outstanding balance and still allows the buyer to get a clear title to the property.

The bank, however, can change their mind even at the last minute just before closing (and sometimes do) because they are not a party to the contract and not obligated to anything. They only agree to this if (1) They believe they will be better off agreeing to the sale than foreclosing on the property and/or (2) They do not believe anyone (the seller) is attempting to defraud them (by selling to a relative or friend). They spend a lot of time investigating to see if this is the best price they can get including getting appraisals and broker opinions. They also look into who is buying the house to be sure it's an arms length transaction and they consider the original purchase to be sure it was not a fraudulent transaction. It takes an inordinately long time to get back to you as buyer on whether or not your offer was accepted or declined. There are no guarantees.

Personally, I believe most buyers are better off not considering a short sale and would recommend looking at REO properties first. For short sales, you really have to have time to work through this process. This can be part of your search but just be aware that it takes time and it might be a waste if the bank doesn't cooperate.

Here's an interesting video just out on MSNBC which explains Short Sales in layman terms.   

Are you looking for US investment property at a discount? Are you looking for a discounted short sale or bank owned property?  John Breaux can be reached at john@marathon-group.cz or +420 602 355 810 or +1 504-208-4331.