Short Sales

A short sale is the sale of real estate at a price that is below what the owner owes to the bank.  Homeowners experiencing a financial hardship often turn to a short sale to avoid foreclosure or bankruptcy.  These days, investors are anxious to buy short sale properties to take advantage of potential bargains.

Successful short sale transactions require you to involve experienced professionals. Real Estate Agents are paid only on short sales that actually close, which can create a terrible conflict of interest if closing the short sale would not be in the property owner’s best interest. Frequently lenders ask property owners sign a promissory note or specifically agree to liability after the transaction closes. Closing a short sale on these terms actually makes the homeowner worse off. Only a qualified lawyer can give you legal advice and fully represent your interests.

Benefits for Seller

There are many benefits to selling your house as a short sale. I outlined a few of the main benefits of selling your house as a short sale. Depending on your own specific situation, the benefits can be significant.

•   •  Working out an arrangement with the lender avoids any legal action by the lender later.

• •  Selling at a short sale helps both homeowners and lenders get a fair price for the property and liquidate a declining asset.

• •  Avoid foreclosure, stay out of public record filings.

• •  Possibly avoid bankruptcy.

• •  In the event of a market rebound the property value will remain so far below what is owed, the property will always be a burden  without an upside.  This could wrap up a bad investment with no loose ends or lingering liability. 

Benefits for Buyer

The media is abuzz about the explosion in the number of short sales and what great opportunities await.  Websites promise bargains on short sale homes, or promote “foreclosure lists” for a fee. In reality, there are good buys on short sale homes, but there are also a lot of traps and there is always a price to pay. The process of locating, buying a short sale, and working through the legal and emotional complications of a short sale is not for everyone.

Many investors assume that the very status of a property as a “short sale” listing makes it a bargain.  This is not true and is a risky approach to investing.  The benefits of short sale for a buyer are determined by the particular transaction, not some formula or general criteria.

If you are interested in buying a property available as a short sale, done properly, it can be lucrative and rewarding. This is especially true when you hire a professional, to avoid making the common mistakes of investors.     

 Challenges When Buying Real Estate via Short Sale

• •  A short sale usually means that the home has decreased in value since the last sale, and may be in a declining market.

• •  Short sale real estate is sold “as is” without any representations or warranties, thorough inspection by a trusted inspector is a must.

• •  Short sales generally take much longer to close because the lender often adds several obstacles that must be overcome.