Short Sales

Short sales are becoming more and more common.  The one thing that they are not is "short" as far as time goes!!  A short sale means that the seller is selling his house for less than he owes on it.  When you make an offer on a short sale, you need the seller to agree and you need the bank to agree.

Short sales can allow a buyer to get a great deal on a new home however, they will have to be very patient.  Many short sales can take anywhere from 2-6 months to get approvals done and the sale completed.  I have been involved in a couple of short sales that have taken almost a year to get completed.  It is not uncommon for a buyer to get frustrated and decide to walk away from the home purchase due to the length of time it takes.  For some buyers, it can be perfect as they may need time to complete the home purchase.

If you are going through a divorce or need more time on your current job before you can close, a short sale can allow for that.  If you are waiting for your lease to expire, a short sale may work well.  However, if you need to move in a hurry, a short sale is not the best option.

Once you have written your purchase agreement and the seller agrees to the sale, the listing agent will present the offer to the bank.  Many listing agents that specialize in short sales work with a lawyer that helps to get the short sale approved.  If the seller has a first and second mortgage on the home, both lenders have to agree to the terms of the purchase agreement.  It is fairly common for the first mortgage company to only allow the second mortgage company to get paid between $1000-3000 regardless of how much the second mortgage is for.

Sometimes the bank that holds the second mortgage will not agree to the short sale – or it may take several weeks/months to get both banks to agree.  I have seen a couple of banks require more money than the first mortgage is willing to agree to.  In that case, it is up to the seller and buyer to negotiate that extra money.  Most buyers are not willing to pay extra towards the seller's current mortgages.  If that is the case, the entire deal may fall apart.  All money that is involved in the transaction has to be on the settlement statement at closing.  The first mortgage company has to agree with any extra payments.

Some banks will file a deficiency judgement against the seller.  It will not affect the buyer, but will stay with the seller until it is paid.  It is also more difficult for the seller to get their next mortgage as they didn't pay off the current mortgage in full.  Many lenders require a minimum of 2-4 years after a short sale before they will issue a new mortgage.

The biggest thing to remember if you are looking at buying a property listed as a short sale is patience!!  It is not a fast process, every lender is different and if there is more than one mortgage, know it will take longer.  Some properties may be close to a sheriff's sale in the foreclosure process and that can affect the short sale approval.  Make sure you stay in touch with your realtor and that they are staying in touch with the listing agent.  With a little patience and with time, you can have a great deal on a new home!

Leslie Vanderwerf,  NMLS ID#335509, Advisors Mortgage - EmailWebsite

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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