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Shortcomings of Short Sales
September 21st, 2010 11:27 AM

Short-sales are everywhere these days and most buyers know that a short- sale is anything but "short."  The reality is that short-sales usually take 3 to 4 times as much as a regular sale to finally get to closing.  From the time a property goes under contract to the time the lender approves, it could take anywhere from 30 days to 6 months to even get an approval, depending on how fast critical information is given to the lender by both the buyer and seller.  Expectations for both buyers and sellers must be set correctly from the beginning to avoid any last minute shortcomings that will end the process.

Buyers who make an offer on a short-sale property need to know that lenders underwrite to make sure that they are allowing the sale to happen close to market value.  They will check the seller's financials to verify they cannot afford the house any longer; then they will order a price opinion from a broker or certified appraiser, commonly known as a BPO (Brokers Price Opinion) to make sure the house is being sold close to market value.  If the offer is too low compared to what is owed, it will make more financial sense to the lender to just foreclose the property and re-sell it as an REO (Real Estate Bank-Owned).  All this will happen while the buyer is still waiting for a response to the offer given in a contract.  So weeks of waiting could be wasted for the buyer!

Sellers need to be educated to the entire process, from the necessary documentation needed for the lender, to the various options they may have.  The lender takes its time responding to any short sale request; they will only give a short timeframe to provide any missing documentation; and often the borrower is served with foreclosure paperwork from the lender while the short sale is being processed.  Foreclosure and short-sale are parallel processes and one does not cancel out the other.  At best, a short-sale might delay a final sale date, but it will not stop the lender from starting the foreclosure proceedings.

Short-sale success comes from educating the seller, the buyer and everyone else involved in the transaction.  That's why it is so critical to work with an agent who is a certified "Short-Sale and Foreclosure" Resource.  I am such an agent, who has taken the class and passed the exam to understand the full procedures and documentation involved in handling distressed properties. Please let me know if I can help you in any way.

                               

 


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Posted by Barbara Doeringer on September 21st, 2010 11:27 AMPost a Comment

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