Hi All,

In the past I have talked about what seller’s need to know in order to successfully navigate a Short Sale. Now, let’s talk about the Short Sale Secrets that buyer’s need to know.

First I need to level with you, there really aren’t any “secret’s”. Getting from “I Love It” to “Sold” is not a mysterious uncharted territory never before explored by man or beast. Even if it might feel like it sometimes.

No, successfully buying a home that is a Short Sale requires agents who know what they are doing on each side of the transaction, seller’s who understand their situation and the process, oh, yes and the patience of a saint.

Here’s what I think Buyer’s need to know…

Short Sale’s take time, lot’s and lot’s of time. This is how you wind up paying for the savings that purchasing a Short Sale may give the buyer. And when I say time, I mean TIME. After an offer that is acceptable to the homeowner is submitted to the bank for approval it will take, on average, a minimum of one month before you hear anything at all. Don’t be surprised if it takes longer. The lender’s are swamped (no surprise there) and each and every transaction they are dealing with is complex, challenging and usually sitting next to a thousand others just like it.

Short Sale’s Are Not Always A Great Deal Remember that what is really happening when a lender agrees to allow a Short Sale to take place is that the lender is agreeing to take a loss on a portion of their investment, sometimes a fairly significant one, because it has been demonstrated to them that the amount they receive by accepting the reduced payoff will be greater than the amount they would receive if they take the home back via Foreclosure and have to sell it themselves. So, by allowing the Short Sale to take place they have already, in their eyes, effectively given the buyer a “discount”. So, while you can sometimes get a good deal on a home in this situation, in most instances you will be paying about or just a tad under current market value. What you do get as a buyer of a Short Sale is information that would not be made available to you if the home has already gone through the Foreclosure process. And, if you and your agent both really understand the process you may have less competition for the home you want because there are a whole bunch of folks out there who can’t or won’t wait for the process to run its course.

“When A House Is A ‘Short Sale’ The Price It Is Listed For May Not Be The Price It Is Allowed To Be Sold For”
One major difference between a home listed as a Short Sale and one that is either not in distress or one that has already been through the Foreclosure process and is now an R.E.O. (Real Estate Owned, meaning that the bank has Foreclosed on the home, bought it back and is now reselling it to recoup their loss.) is that the price placed on the home, while it may be very market appropriate, may not be the amount the Lender is willing to accept to pay off the Seller’s debt to them. So, don’t be surprised if you make what you, your agent and even your Great Aunt Nellie all know to be a fair or even a down right good offer for the home that may even be at or above the listed price only to have the lender respond with a different amount that is higher, sometimes significantly so, than your offer.

“Short Sale’s Need A Good Agent On Both Sides Of The Table” If you are working with an agent who does not understand the process and how to help you construct an offer that the seller can accept, and most importantly, that the lender will agree to, you could be dead in the water. And, if the seller has not chosen a representative that knows what they are doing and how they need to do it, you are even deader. I have seen offers come across my desk where the agent helped write an offer that would cut the second to less than nothing, significantly short the first and also ask for credits, repairs and closing costs. I chalk these up to agents that just plain don’t know the rules. Offers like these are a waste of effort, time and paper. Even for a wonderful agent who knows all the in’s and out’s every offer written won’t be accepted, but I believe that every offer I help construct should be able to be.

Short Sale’s Don’t Always Work Out But When They Do They Can Be A “Win” For Everyone
When a lender agrees to allow a Short Sale to take place it helps more than just the potentially defaulting seller and the new buyer, it helps the community too. Homes taken out of the Foreclosure pipeline and purchased by new, capable buyers will once again help to support the community at large by adding property tax payments to the city coffers and by keeping a home from going completely through the Foreclosure process, properties that could become vacant eyesores can instead continue their lives as family homes.

Bottom line, If you thinking about entering the housing market as a buyer, make sure you and your representatives are well educated on the ENTIRE process. And, provided that you know what to expect and what you are getting into when you start, buying a home in Short Sale status could get you the home of your dreams as long as you are not in a rush to finish.

Take care all, have a great day and help lots of people!

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16 Responses to Short Sale Secrets – What Buyer’s NEED To Know…

  1. MelaneeM says:

    Are you avaiable to represent buyers in Riverside County, CA? (Specifically, Hemet?) What are your terms? Are you paid from the sale price, or is the buyer responsible for paying you out of pocket in addition to all other costs?

  2. Hi Melanee,

    Thanks for stopping by… Yes, I sure do help in Riverside and I, like most agents when representing the buyer exclusively in a transaction am paid out of the seller’s proceeds.

    This is yet another reason why someone looking to purchase a home should run, not walk to get themselves their very own Realtor to represent them in the transaction.

    I would be happy to speak with you at your convenience. Please feel free to give me a call at (909) 837-8922 or drop me an email Tisza(at)HomesbyTisza.com.

    Once again, thanks for stopping by. Take care, help lots of people and have a wonderful day!

    Tisza Major-Posner, Realtor, DRE#01784679

  3. KJN says:

    Tisza, great site!

    I’m currently contemplating putting an offer on short sale in Jersey City, NJ.

    My agent says that to make an offer I’ll need to place a good faith deposit of $1K (no problem with me). Additionally, should my offer be accepted by the seller, my agent claims I will need to pay for initial legal fees and inspection costs, all BEFORE the bank approval.

    Doesn’t sound right to me, is this the norm?

  4. [...] Bottom line, If you thinking about entering the housing market as a buyer, make sure you and your representatives are well educated on the ENTIRE process. And, provided that you know what to expect and what you are getting into when you start, buying a home in Short Sale status could get you the home of your dreams as long as you are not in a rush to finish. Source [...]

  5. It has almost always been my opinion that it was the lack of government over sight of the mortgage/banking industry that caused the problem. For those that are calling for the breakup of fanny/Freddy, I think you are miss guided. Both Wall Street and the GSI’s were greedy, nothing more. Wall st via fees and the GSI’s via yield. Both have strong lobbyist arms which have deep and troubling influence. The public was, at the highest levels of government and wall st miss lead. This is not giving the public a pass on being stupid, but the piper played and everyone went along. You will never have a strong consumer advocate government while you have over whelming corporate lobbyist influence over our elected officials. To those of you who still subscribe to laissez-faire capitalism, until you control greed and ignorance, you will continue to doom us to these cycles of boom and bust. Ayn Rands mind set will continue to fail.It is a mess no doubt and with any luck our current government will make good decisions to do the “right” thing and teach people how to fish again so we can get out of this mess!!! They no doubt will hold the largest influence in the solution as it continues to unfold. I know one thing is for certain and that is to get informed and VOTE!!

  6. Krishna says:

    Great article- but it’s really hard to get past the errors in the writing (misuse of apostrophes)- maybe have someone proof read it first?

  7. orcutt homes says:

    I simply could not depart your site before suggesting that I really loved the usual info an individual provide for your guests? Is gonna be again steadily in order to inspect new posts

  8. brenda m beller says:

    i saw you on a message board (somewhere) – i am trying to dispute the never ending hit on my credit report. that i recently found out will not be removed – but was not given a specific time as to when or how much longer it will stay. the “status as of” date is May o6. even though we vacated the home in September 05. the home was a short sale. but the mortgage considered the loan a complete loss for the entire amount of 110,000 +. (we lived there over four year and only missed a couple of payments. i have heard that a short sale should be removed after three or four years?? how long before we can get this miserable ‘flag’ off of our credit?
    thank you !

  9. shannon says:

    I just entered the escrow application and I am going over the fees are there any that I can say I wont pay ? its an approved short sale house I am buying. Thanks

  10. Ron says:

    I am trying to buy a short sale home in Spokane Wa. from Wells Fargo. It has been 6 months. We have agreed to all of their terms, but I can find out nothing on what is happening. The only information they have released is that the home will go into foreclosure in September so a decision should be made by then. Everyone dealing with the house said it should have closed in May. Any advice or someone I could contact to help me out?

  11. Auth says:

    You would need to get a lawyer to draw up a cocrtant for you. To do this is tricky. Even though they have a guarantee to sell on their house, there are still ways the sale on yours can fall thru. If they have an inspection done on your home (after they’re renting but before they buy) and work needs to be done that you’re not willing to do, they can opt out of the purchase cocrtant. The realtor selling their home may opt out somehow on their guaranteed sale cocrtant. Their credit may not be good enough for a loan when it comes time to buy/close on your house. So many things can go wrong to keep the sale on your house from actually going thru. At the very least, you need to have a cocrtant in place with regards to the renting. And know that the sale on your house is not a done deal even though they’re renting from you with the intention to buy.

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