All buyers have one thing in common - they all want to get the best deal possible, especially in this market! Many are turning to foreclosures and short sales in hopes of getting that great deal! If one is equipped with time, energy, and patience, the short sale option might be right for you. But beware, there are many pitfalls when going this route.
Short Sales: A short sale is not quite a foreclosure and not quite a regular sale. It is the step that many home owners utilze before the bank puts the home in foreclosure. A short sale is when the lender will accept less than the full amount due on a mortgage. The biggest problem with short sales is that the contract to purchase the home is contingent upon 3rd party bank approval. That means that the wonderful price that you think that you have gotten for the house, may not meet the banks expectation of what they are willing to take for the house. 
Quite often, the short sale price that is advertised is considerably less than what the seller owes to the bank. For example the seller may owe 200K on the house but advertises it for sale at 175K. Sounds like a great deal right....except now the bank has to be convinced that they should take 25K less than what is still owed to them. Most short sale contracts will stipulate that once the contract is ratified by the seller and buyer, the bank has upwards of 60 days (depending on the bank policy) to give you thier decision. Best case scenerio is after the banks alloted timeframe it will accept the offer and you get to close on a great deal on a house. The most common scenerio is that the bank will take the entire time alloted and then decide that they will not accept the price for the house. You then have the choice of paying the full price owed to the bank or moving on to another house. Note: the bank takes its time replying intentionally because they want to wait for other offers.
Why would someone use the short sale process you might ask? It most often occurs in declining markets! I see it mostly in new construction neighborhoods. The price that was paid for a given house 2 or 3 years ago is considerably more than what the builder is offering to build the same house now. The seller has to sell because he/she needs to relocate. Thus the seller must reduce his/her price to be competitive. This is only one of many scenerios for short sales.
Banks are not interested in being in the real estate business, other than offering a loan for the purchase therein! They tend to leave the process of buying and selling to the Realtor professionals. With that in mind it is also not in their best interest to loose money. Quite often, banks would rather the property fall into foreclosure, pay a few thousand dollars to get the property up to where it should be, and recoup the money they would have lost by allowing a short sale. There are real estate professionals that base their entire business plan upon working with banks to do just that.
For more information about short sales, contact Michael Johnson at 843-817-5299 or visit my website at www.providingthelight.com
If you have a home anywhere in the Charleston Metro Area and would like to get more information about selling your home, please contact me for a free home evaluation.
I also work with buyers. If you are interested in more information about buying a home please contact me and I would be glad to meet with you or email you a list of homes.
Michael J. Johnson, Realtor, ABR
843-817-5299
michaeljohnson@carolinaone.com
"Providing the Light to Guide You Home"
Hi Michael,
I just work with my first short sale, it was STRESSFUL, FRUSTRATING and DIFFICULT but we got it done.
Those are three words I hear often about Short Sales!! It's no fun for all involved.
I think the frustrating thing about short sales is that they are a pain in the you know where and there's no guarantee of the commission so you may be working for FREE. I just had an agent in my office where at the closing table, the bank further reduced both agent's fee after it already being previously reduced. They are a lot of work and a buyer must be patient and not have to move in within a 30-45 day timeframe. The problem with the market right now is partly due to these banks and their short sales. The market would do better if they could respond quicker. It cost them more money to go into foreclosure and they really should consider expediting the short sale.