Because many buyers don't understand the short sale process, they tend to become very impatient while waiting for short sale approval.
Moreover, listing agents wouldn't have to sell those homes 3 or 4 times before a buyer decides to stick with it and hang around . . . read more about the Short Sale Process.
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At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
Comments
The Short Sale process can very tricky and hard to understand especially during a rough time, however if done correctly it can in fact be the best option and a fresh start for the owner. I have done hundreds of short sale transactions and always make it as smooth as possible for all of my clients, because i know exactly what they are going through.
My husband and I are in a bad situation at our condo. The condo is suing the builder for negligence which has caused massive wood rot. The legal process has been going on for almost 2 years. There is a set court date but there is always the possibility that we could lose. We have debated foreclosure. The condo is just in my name. Would short sale be our best bet? If so, could you explain the process to me…please! Thank you!
You should first find a short sale agent with experience but your biggger problem will be the lawsuit. With a lawsuit pending in your complex, a potential buyer will probably need to pay cash because a lender won’t lend on it.
As for the short sale, typically there are 2 circumstances required to do a short sale: you would be in the red at closing and you have some kind of a hardship.
Elizabeth, I have read your article and am amazed that your answer to the short sale issue is that the buyers SIMPLY need to wait longer. It is interesting that you outline the bank timeline and do not address an issue with it. Your respondce makes it appear as if
this is an appropriate or reasonable timeframe. If the bank gave timelines and set dates, the buyers, often first time buyers, would not feel like they have entered a black hole. Real estate contracts include timeframes because they acknowledge that there are timing issues when buying and selling a home that have to be taken into account as well as other life issues. The blind eye and open ended approach as acceptable you give to the bank is at best unrealistic when forced to incorporate this with real life.
While I share your frustration with the unreasonable time delays caused by the short sale banks, Susan, the thing is you and I cannot change that problem. It is what it is and I’ve complained about it for years. Buyers who don’t or won’t wait simply add to the problem. Banks don’t care. Banks are heartless.
Elizabeth, I just came across your article while searching out information regarding short sales in my area in an effort to avoid them. Like Susan I was surprised at your overall view that sellers need to hang in there longer. My wife, who is seven months pregnant, and I started a short sale process 60 days ago. Through our agent we found out the that first negotiator was involved in an accident, causing a delay, his replacement we were told, after several days of trying to contact him informed us we were back to square one. Maybe negotiators are part of the problem? We were more than happy to wait 90 days for this particular home at the time we started. If we walked, are WE really part of the problem? We started this with the thought of having plenty of time before our new baby comes; now we doubt it. Though banks are “heartless,” they still are business looking to profit. I am not speaking out of frustration when I say that maybe, if someone took a moment to carefully examine the reasons why informed buyers walk away, the process might change. I don’t believe buyers carry as much of the responsibility as you do.
Not all buyers are cut out to buy a short sale. Some buyers should never enter into these transactions. Are the buyers to blame — no, of course not, it’s the banks. But the banks aren’t gonna change overnight — so if you can’t stand the delays, the headaches, the hassles, the uncertainty, save yourself the grief and do not try to buy a short sale. It’s as simple as that.
I made an offer on a short sale property this past Friday. My agent told me the seller has accepted our offer and it will be sent to the bank for processing on Monday. My offer had a 17 day time limit from seller acceptance to remove inspection contingency. Should I have the inspections done before receiving the bank approval?
What steps do I need to take going forward?
This is a question you should ask your agent. Because you mention 17-day contingency, I suspect you are in California. In that case, you should read your short sale addendum that would have been made part of your offer. Is the box checked in Section 2 ii? Ordinarily, inspection periods commence upon lender approval. It depends on how your agent prepared the offer that you signed.
I am attempting to purchase a short sale right now. My husband and I looked at that property, liked it and submitted a full price we pay closing costs offer. The thing that baffles me is I was talking with my husband saying well we submitted full price wouldn’t this make our process a little faster (we aren’t in a rush by any means). He said no that the list price is the “owners” decision not the banks the owners list it and then offers are submitted to the bank. WHAT??? So the bank doesn’t pre-approve a listing price when they are the one’s taking a loss? I’m confused. Wouldn’t it be easiest if the lending bank of the seller is the one to set the price of the home to make the process faster rather than going back and forth with offers and them deciding they don’t want to settle for less than a certian price? I thought the bank decided yes we will let you sell short, this is the going market rate and this is what we want the list price to be. Leaves me somewhat puzzled because of course the process is long because banks have stacks and stacks of short sales on their desks due to the tough economy and crazy buying programs that crashed and burned. Wouldn’t it expediate if the offers coming in were close to what the banks want so they could have a best and final price and offers not within that price are sent back and those that are, are then accepted and processed? You would think the banks wouldn’t want to keep going back and forth because then it is longer that they aren’t getting anything out of the deal and having to suck up no payments coming in.
Banks aren’t under the gun to do a short sale. It bears repeating that a short sale is not a right; it’s a privilege. Hopefully your agent ran the comparable sales and your offer is near the comps, which is why the bank will take it. Some banks do set the price in advance — that’s how a Bank of America runs it Cooperative Short Sale Program. But most do not. That’s because the first time they hear about the short sale is when the seller’s agent submits all of the paperwork, including the buyer’s offer and HUD.
Sometimes, even if your offer is at market value, the bank won’t take it because the bank might make more money by foreclosing.