The Summer of the Short Sale

I just got back from a vacation on the east coast. Part of the time I was there I stayed with family outside of Boston. Invariably, real estate and the real estate market was a logical topic of discussion, considering that one of my Aunts is also a real estate broker. In general, it seemed that a lot of people in the Boston area (which has historically had some of the highest real estate prices in the nation), view the market as being battered and beaten down by the current real estate down turn. "It will come back eventually, it's a cycle," said my Aunt who is a real estate broker in Westwood, MA- an affluent suburb of Boston. She also said, "Now is the time to buy. We have a lot of inventory, and the prices are very manageable compared with a few years ago." Interesting, I thought and agreed. It is a great time to buy, and buyers can afford to be choosy right now.

On the plane trip home, I picked up an article in the Washington Post, entitled "Where Short Sales Stumble." It was a remarkably well written and informative article that had an excellent perspective about short sales. I recommend anyone who is considering buying a short sale property, or anyone wishing to increase their knowledge of short sales to read this article. Considering that it's a buyer's market in most areas of the nation, many buyers are on the lookout for 'deals.' You can't blame them! That MLS listing of a 'short sale,' may not be as legitimate as it appears on the surface. Buyer beware. If the seller is upside down (owing more on the house than it's current market value), a short sale most likely will not be accepted by the bank- especially if the buyer is not behind on their payments. Don't let the seller fool you on this one! Most upside down owners should consider staying put if they can afford their mortgage and do not have to move. Banks are a for profit business, and they do not have sympathy that a borrower's house has dropped in value if the borrower can still afford to make their payment. Borrowers in this situation should be prepared to stay put, unless they have the cash to pull from their pocket or 401K to close a sale. So make sure that you are dealing with a legitimate short sale, not an upside down owner.

There are a series of questions that any prospective buyer of a short sale property needs to have answered before making an offer. These are the most important questions to get answers to upfront. Having answers to these questions, will (in my opinion) dramatically increase the odds of having your short sale purchase actually be accepted by the bank and close escrow.


1) How many banks need to approve the sale?

A- If it's more than one, the property will most likely fall short of being accepted as a short sale because it will require the approval of more than one bank.


2) Has the seller received a notice of default?

A- If so, the bank is probably ready to deal, but make sure that the foreclosure date is at least six weeks away- otherwise it's too short of a window for the myriad of paperwork and red tape that you will have to cut through to get the short sale approved.


3) Has the short sale been 'pre-approved' by the bank?

A- Do not attempt to make an offer unless this is the case. If the bank hasn't heard that the borrower is wanting to negotiate a short sale, it may be news to them, and you do not want to deal with the type of seller who is just hoping to dangle the 'magic carrot' in front of the lender. Do you want to be the guinea pig, and take a gamble that the lender will bite?


4) Does the listing agent have experience in negotiating short sales?

A- This is a very important question to ask up front. If the answer is no, consider walking away, as once again, do you want to be the guinea pig? If you're dealing with an aggressive listing agent who is experienced in negotiating short sales, you may be in luck. But make sure the the listing agent has the right person to talk to at the bank, and that they have initiated contact before you submit your offer.

Overall, the percentage of short sales that go to closing is only about 1 in 20. The key in successfully buying a short sale property is to work with an experienced Realtor, don't do inspections prior to approval of the short sale, and be prepared to walk away if it seems like more hassle than it's worth. Make sure you have all the facts before you make your offer- or it could be a really long (and costly) summer for you. And remember, there are plenty of great properties that are priced realistically to choose from that will not be so aggravating to negotiate with. That's the buyer's advantage in this market.

Please contact me with any questions about this article, or about the Tucson real estate market. I would be happy to be of service with your real estate needs.


Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Realtor with Long Realty
Direct: (520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/