Tony,

OK. I'll bite......

The obvious advantage is that you get a good home at a great value while the disadvantage is that the transaction could take a life time and still not get approved.............

Bill

The only disadvantage I see is, it take's longer to close. You have to have patience. Sometimes it takes between 3 - 6 months depending on the lender.

Here is some recent insight since my last posting. I have just had two closings on short sale listings. Believe it or not the problem in closing was not the lender holding the note.....it was the lender for the buyer! In both cases the BUYER'S lender (even after coaching and monitoring) was not motivated to comply with the short sale requirements of submitting docs 48 hours prior to closing. The lender obviously assumed the normal midnight hour of 'throwing it together' would suffice. Well, it didn't and required amendments to extend the closing date and further approval from the lender holding the note.......in both cases it took an additional 30 days to close!

Timing is the greatest disadvantage due to the fact that most buyers will want to close and move in within a certain time frame, and when purchasing a short sale listings, that makes it extremely difficult and uncertain.

From a buyers perspective, the main issue I find is time frame...because you don't know exactly how long it will take...this means that you have to tie up your cash when you could have used it to go out and buy other deals that may come your way while you are waiting...

However I have found that you do get a better quality property through a short sale....

In general I just weigh up the pros and cons of the deal at hand....if its looks like a great deal then I'm happy to wait the time for it to come through, while I'm waiting I can do all my dudilligence, rehab preparation, contractors quotes etc and have everyone ready once we get the go ahead to move forward.

Hope this helps...
Cheers,
Chris

The biggest disadvantage for the buyer is timeframe. Typically, the bank will not review the seller's application and approve a short sale until the seller can also produce an offer (from the buyer) to pay off the debt. In some cases it takes 6 weeks for the bank to process the seller's application to determine if there is a "bona-fide" financial hardship and then to convince the investor (which may be a 3rd party if the bank is just servicing the loan) that the offer price is more than they would get if they allowed the property to go into foreclosure. This entials getting appraisals and back and forth communication between the bank and their investor.

Meanwhile, the buyer just wants a response to their offer. This requires a lot of patience ont he buyer's part. Once the buyer has received a response from the bank (or lender), if the offer is not accepted, typically a counter offer is submitted to the buyer and to the buyer's surprise, it could be more than the original asking price... this is because the bank is trying to get the highest price to satisfy the investor, not the seller as the negotiation is actually between the investor/bank and the seller, not the buyer and the seller. If the counter offer is not accepted by the buyer and the buyer submits another counter, the process starts again and could take several weeks just to get another response.

Sometimes, you see homes that are advertised as "buyer just walked" need to sell fast. This is usually when the buyer in the deal has gotten frustrated and is tired of waiting for a bank response and because the transaction has taken so long and presumably the seller is not paying the mortgage, another bank department is starting the foreclosure process and the clock is ticking. Unfortunately, some homes end up going into foreclosure. However, sometimes another buyer will come in just in time with a strong enough offer to satisfy the investor. This is usually the best time for any buyer to get into short sale because most of the initial paperwork and application processing has been completed on another buyers time.

One thing to know, is that the agent's experience in short sales makes a big difference in how well the process goes. An agent who specializes in short sales can tell whether the seller will do their part in helping the process along, and that, among many other things, is critical to whether the sale ever closes.
Find out how many short sales the agent has done, and what their success rate in closing them is.

I have a short sale agent I partner with when working on short sales. Her success rate is great and she can often save a deal that another agent would lose, because she is an expert and understands the complicated process. So my short sale clients get a team, instead of just one agent!

Timing can be a big frustration.
Also for a buyer how is on a timeline, short sales are almost never easy.
It can make the homebuying experience painful.

I would have to agree that the time can be a bit much, but if you have a listing agent who is on top of the bank and pushing them and their seller forward, it is not that long. I just closed a short sale in less than 90 days (from the client contacting me to close) and it was all brought on by getting my clients information and the completed package to the bank all at once. I was also told by the bank employee that it was one of the first completed packages she had seen in some time and I was always polite in requesting information from her. The buyer was patient mainly because I contacted them on at least a weekly basis to give them a status update. Everyone was prepared to close on time and my sellers actually got quite a bit of money in their Seller's Incentive back to help pay some other bills. I do however disagree that the bank is looking for "market value." I have both helped purchase and sell short sales and none of them were at "market value," but more along the lines of what HUD is looking for, i.e. 70% or more of what is owed. What makes me laugh is when the listing realtor is trying to get more money for the home than it is worth or that the bank requests in order to create more commission. We all know it doesn't matter if the bank makes money they have already written off the losses. You are helping a client in a bad position - either help or get out of the way. Buyers can get more than 1/2 off the market and/or tax value on a great home, sometimes you just have to view many ugly and undesirable homes to find the one great one that fits your clients needs. Keep talking to your buyers and the listing agent and no one gets antsy to the point of giving up - even you!

The main disadvantage for the buyer is that you won't know whether or not the bank will agree to the terms for several months. In that time, you may have missed some other homes that would suit you just as well.

Also, in a typical short sale the seller has know for a while that trouble is looming, so the amount of deferred maintenance is often significant. And the seller doesn't want to spend a dime to get the house ready to sell.

I just showed a home listed at $1.2M. Nicely done inside, but obviously has needed a paint job for quite some time. The buyers were turned off by the lack of upkeep so didn't submit an offer. Their thought: what else haven't they done???

Lastly, make sure you know your market. In some areas where prices are still declining, it's possible that by the time short sales are approved, the market has dropped enough so it's not even a great deal!

Main disadvantage? They may never get the home. Around here 1 in 5 short sale offer work and 40% of the short sales sell in a given year. Now personally, my numbers are much better than that, but they will never be as good as offering on a regular sale.

I prefer the Google response. "Do you feel lucky?"

Disadvantages are possible length of time to complete transaction, price from Bank not being justifed after the BPO is done. Bill pretty much wrapped this conversation up! Best of Luck

Hi Tony,

There are so many variables from the lender to the listing agent that will determine how fast and smoothly the transaction goes. As an agent you cannot really control those factors so it is important to know and understand the process.

The advantages to a buyer are they may be able to get a great deal on a home. Remember lenders want to get as close to fair market value as possible. FHA short sales are a little easier to navigate as the price the lender will accept can be more easily obtained. This is not the case with a conventional short sale.

The primary disadvantage is the time frame. While short sales can close quickly they can also drag on depending on the lender and experience of all the parties involved.

Don Groff
REALTOR® | Mortgage Broker
Keller Williams Realty | 360 Lending Group
o.512.669.5599 m.512.633.4157
listings@dongroff.com

As for a long length for a short sale contract; to concur others, it does take a long time.

But your question was if this is a good deal for the buyer; “NO”. To explain what the short sale is; the value of the loan is higher than the value of the home itself, so the seller is “short” when it comes at the closing. Now you will negotiate with bank (for a long time) and bank will lower the loan amount (accepted sales price) to the value of the house so this can be closed. So what did the buyer get!!? A house at or near the market value that the sellers has not taken care of it for a long time!!!!
You will get a much better deal on a property that bank has already taken over and it is part of his asset now (Bank Owned properties), where the bank is willing to Really Negotiate.

I specialize in REO and HUD homes but I stay away from the Short Sales. I hope that I could answer your questions. Please contact me at 512-468-8788, if I can be any assistant to you in your next purchase.

Having just completed another short sale that took 18 months to close, I'm not sure there is any advantage to the buyer because the lenders have a way of getting close to what the homes are worth, when a pipe broke they made the buyer pay to fix it, it takes way too long, and once again, they cut my fee the day before closing, after 18 months I was ready to end that nightmare, I don't want any more short sales, I'm done. To say that the short sale departments are dysfunctional is like the understatement of the year. I think I aged ten years on this last one. So did my seller, so did the buyer, and the buyer agent.

The advantages are that you can get a disclosure, survey and the utilities are already on for the inspection (compared to a foreclosure). There is also a financial incentive (from the lender) for the owner to keep the home marketable. As a short sale specialist for both listing agent and buyer's agent the disadvantages are the time frame. I get referrals from other agents all the time. If your clients are interested in a new listings that states 'short sale potential' it means the document package is probably still being put together and has not even been submitted to the lender for approval yet. On the other hand, a short sale on the market for 60 days could already have the formal acceptance letter in hand and the appraisal completed and could close in 45 days or less. I have 5 short sales right now and all under contract (some with back up offers). Most are beautiful newer homes being purchased at really incredible prices.....too bad most are being bought by out of state investors turning them into rental property because potential owner occupants are afraid of short sales. The BIGGEST disadvantage to a buyer involved in a short sale is to be represented by an inexperienced agent.

Tony,

The main disadvantage is time. Although it is called shortsale, it takes a long time for bank to get back with you and for you to close.
Other than that I think there are some great deals out there.

I hope this helps,

Albert Elhage
Broker/Associate http://www.Albertelhage.com
aelhage@austin.rr.com
JB GOODWIN REALTORS®


(512)971-1773 (Mobile)
(512)327-7449 (Fax)

BUY.SELL.SAVE

"To leave satisfied you must arrive prepared."

The only challenge (assuming the listing agent is truly capable and efficient in short selling homes and not a part timer or someone who neglects their short sale listings) is the delay in closing as compared to a normal resale. Since the lender's terms must be accepted by the seller, sometimes there is negotiation involved and that may cause a delay. If the buyer can wait, and the buyer's agent has done his/her research on the short sale listing agent's track record, then offering on a short sale is just as sound as any resale property.
The key is vetting the listing agent. So many agents out there shouldn't be listing short sales since they don't have any real effective process in place or simply do not have the qualification to execute a timely short sale.
That being said, #shortsaleswork.
http://www.douglastrevino.com

The advantages are that you can usually get a good deal on the sale. But with that being said it can take several months of negotiations with the bank to close the deal if it ever closes. Every bank deal is a little different so it depends on a lot of things. If you are working with an agent they will be able to walk you through all the details step by step