Short Sales and Foreclosures


Recent news reports are often discussing homes in foreclosure, but as a Realtor  I see more short sales at this time. Many of my clients see an online listing for a home, only to have me inform them that it's a "short sale."

A foreclosure is a home that has already been repossessed by the bank. The bank has become the seller. A "short sale" involves a seller that needs to or has to sell their home, but owes more money on the home than the home will sell for at market price. The seller may also have a second mortgage on the home. A common scenario would be that this seller bought their home in the height of the market and then have a change in employment or income, forcing a sale. 

To make an offer on such a home can be a complex transaction, as the buyer is not only making the offer to a seller, but to a third (or fourth) party that also must approve the sale. The sale price is below what is owed so the listing realtor or a mediation company must negotiate the loss with the third party. The process is byzantine and can easily last six months- third parties are slow moving and notoriously difficult to reach. The buyer will often not hear whether their offer has approval for weeks or months. Often, the third party does not sign a contract with the buyer until the last moments of the transaction. An inspection can be ordered by the buyer after approval of their offer, but the purpose for the most part will just be to know what they are buying, as the seller and the lender are already both too "under water" to make any of the usual negotiations for repair or price concessions.

It takes a special buyer to be able to buy in this time frame and undergo the emotional ups and downs. A normal transaction can often be challenging enough for the average buyer. For the sellers who are trying to salvage their credit and move along, the process is incredibly stressful. For the market, this process will keep the inventory at higher levels as a more typical transaction closes in 30 days from the seller accepting an offer.

As a Realtor there is no avoiding the current market, and I will continue to represent my clients best interests. I work with a professional short sale consulting company that will simplify the process as much as possible for my clients.

My hope is that there will be more oversight on the process to make it more transparent and streamlined for all parties involved.