In real estate, a short sale is defined as the sale of a property for an amount  less than “short of”  the balance owed on the property’s mortgage. Short sales are most common in situations where the borrower cannot continue to make monthly payments and the market value of the home is less than the owed on the mortgage. The lender agrees to sell the property at a moderate loss as an alternative to initiating foreclosure proceedings.

 

The concept of a real estate short sale can be attractive to all parties involved

in the transaction. Lenders avoid significant fees incurred during a foreclosure filing and the possiblity of selling a degraded property at an extreme loss at a foreclosure auction. The obvius benefits to the seller include preventing the negative credit impact that accompanies a home foreclousre. Discerning buyers can purchase a property at a price below current market value if the lender is willing to accept such an offer.

 

In practie however, there are a nubmer of complications that may make the short sale process uncertain, risky, and unattractive. Several parties need to agree on the closing price, which can be a particularly difficult if there are multiple loans from differnent lenders on the property. Sellers sometimes list a short sale property at a price that is unlikely to be accepted by the lender in hopes of attracting potential buyers. Buyers therefore have no guarantee that the bank will accept their offer, even if is is at or above the asking price. Once the lender accepts an offer, the buyer has no guarantee that the lender will not accept an eleventh-hour offer from another buyer and lose the purchase.

 

Perhaps the greatest deterrent to buyers is the uncertain acceptance status and approval timeline. Buyers often wait several weeks for a lender to even acknowledge receipt of an offer. Ordering an appraisal, acknowledging receipt of the appraisal, beginning negotiations, accpting a final offer and closing may take several weeks each! The result is a highly unertain process that may take anywhere from several weeks to more than a year without a professional that nows how to do all these things in a timly manner!