You've probably heard the term "short sale" before, but likely haven't heard a clear or simple explanation of what it means exactly.
Let's go over a basic description of what a short sale is, and then we'll look at some more specific details.
A short sale is when someone sells their home in the unfortunate circumstance that they owe more on their mortgage than the home is worth in the current market.
For example, say a homeowner owes $200,000 but their home is only worth $180,000 in the current market. In order to sell their home, they can ask their lender to approve a "Short Sale" to sell the home for $180k, even though they owe $200k on it. In most
cases, the lender will consider the mortgage paid off at that point and write off the difference as a loss.
From a buyer's perspective, it usually takes a lot of time and patience to get through the short sale process. In recent years, banks have become quicker to process short sale offers than they have in the past, and usually respond within about 6-8 weeks.
If the bank accepts the offer, the closing will usually be about 4-6 weeks after that. So the entire process usually takes 2-4 months, depending on the bank and circumstances.
One common misconception about short sales is that because they're a short sale means they're priced significantly below market value. But that's not always the case. A short sale listing may be advertised at a price well below the market value,
but just because it's advertised at that price doesn't mean the bank will agree to sell it for that price. As part of the short sale process, the bank will have the home appraised to determine what it's worth in the current market. And generally speaking,
the bank isn't going to agree to a short sale for far below the market value.
That being said, a short sale can be a good opportunity to buy a home with less competition from other buyers, if you have the time and patience to wait it out for a few months.
One thing to note when looking at short sale listings is to find out if the bank has already agreed to allow a short sale at the listing price, which is called a Pre-Approved Short Sale. In that circumstance, the timeframe can be much quicker than starting
at the beginning of the short sale process, and sometimes can even close in a typical 30-45 day period.
So don't be scared away if you see a home that's a short sale, just keep in mind that it can take several months to get through the process, and the bank isn't necessarily going to agree to sell it for the price it's listed at.
Give me a call or shoot me an email if you have any questions about the short sale process! My cell number is 770-691-1560.