What is a Short Sale?

A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it.

Buyers pursue short sales to get a good deal, but buying a short sale is not as simple as you may believe, and very few can close in 30 days or less. Buyers have waited 4 to 6 months to close on a short sale, sometimes longer.

Hire an Agent with Short Sale Experience…

Jennifer Stauter & Matt Kornstedt Short Sale Experts

As agents with experience in short sales we help to expedite your purchase and protect your interests. You don’t want to miss any important details due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner. We will:

• Check the Public Records and Research the Property
• Qualify the Seller for a Short Sale
• Check Comparable Listing Prices
• Submit Documentation and Offer to Purchase to Lender
• Give the Short Sale Lender Time to Respond
• Reserve the Right to Conduct Inspections

Things To Remember:

1. Listing price is usually set by the agent & seller, not bank. The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.
2. Loans owned by 1 bank usually better than 2. If the seller has loans owned by two different banks it is a lot more difficult to get the short sale approved. This is something that we cannot control; it simply depends on the willingness of the bank or banks involved. While the reasons behind this are complicated, buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. As savvy Realtors, we can let you know this type of information.
3. Lowball offers get slow or no response. Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.
4. Agent must check comparables before submitting offer. As your agent, we must be sure to check recent home sales in the area. Doing this will offer documentation for the offer price and it will be more likely to be approved by the bank. Checking comparables will also give you as the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make you a more informed homebuyer.
5. Don’t hang your hat on the property. Short sales aren’t necessarily “short.” It can sometimes be a very long process. Don’t get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic; the right property will come along.
6. Sellers with other properties or too strong of financials may not qualify for short sale and/or may be asked to pay the difference. Sellers that own more than a handful of properties or have an extremely large net worth will probably not be eligible for short sale. In some cases the seller will be asked to pay the difference of the sale. The seller might even need to sign a promissory note stating that they will pay back all or most of the debt. This has virtually no effect on the buyer as long as the seller cooperates.
7. “Approved” prices are quickest. It is important to remember that short sales are not always timely; however, making an offer on an “approved short sale” can be a quicker process. An “approved short sale” has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn’t end up buying the property. These types of short sales are some of the most highly desirable.
8. Some banks want strongest buyers, some want strongest offers. The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer.
9. Repairs are seldom done, credit is more frequent. If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.
10. When you get approval, must close on time. During a short sale there is no leniency with the closing date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after getting an accepted short sale offer. We’d advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don’t just assume it will happen.

Short sales can be a great opportunity to find your new home at a competitive price. A short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. We hope that these tips will help you to remain positive and optimistic throughout the process!