Short Sales – Info for Buyers

As a buyer in Michigan right now you have certainly been unable to avoid the multitude of foreclosure properties available for sale. But there is another type of sale that you may have seen cropping up as well. A short sale. So what is a short sale? And what does it mean to you as a buyer?

Strictly speaking a short sale is a sale in which the price the house is listed for will not be enough to pay off the mortgage. The seller will be “short” on their payoff amount. Unfortunately, that is about the only thing that is short in a short sale. This dauntingly long and frustrating process means that as a buyer, you could be waiting 3-6 months for an answer on your offer. And after the long wait there is no guarantee that it will be accepted. But why?

As a buyer in a short sale you are negotiating not only with the seller, but also with their lender. The seller will not get a dime at closing and thus their entire motivation rests in the fact that a short sale will not mess their credit as MUCH as a full blown foreclosure. The lender has to be convinced that if they do not complete a sale for less than what they are owed that they will get the property back as a foreclosure anyway. The two things that the lenders are looking at are: 1) Is the property really worth less than what the mortgage amount is 2) Can the seller truly not afford the monthly mortgage payments. It sounds simple enough, but in order to check these two facts the lender requires a mountain of paperwork including the sellers personal fiancingal information, appraisals, realtor price opinions and more. On top of all that the lenders are absolutely OVERWHELMED with the volume of short sale requests they are receiving. One employee at the bank may have 400 files they are working on. That is a LOT.

The long and short of it for you as a buyer is that you can get a great deal on a short sale, but make sure you are prepared for a long and grueling wait to get a response once you find a house you like.