In a relatively short amount of time, thanks to the economy and our national media, the term “Short Sale” has gone from unknown to household vocabulary. As a Realtor in the trenches I have been forced to deal with them, but in full disclosure do not claim to be a Short Sale expert. Nor do I plan on becoming one. It is my wish for the real estate market and our national economy as a whole, to rebound and put the term “Short Sale” back in the dark closet from which it escaped.
The purpose of this article is simply to share with you my hands on experience with short sales and hopefully arm you with knowledge you can use in the future.
So what is a short sale? Technically speaking a short sale is a real estate transaction in which the lender agrees to accept less for the home than is currently owed by the borrower. Depending on the lender, the difference is either forgiven or a new payment plan is worked out with the borrower. In theory, a short sale is a good alternative to foreclosure for the borrower and lender. The borrower will typically walk away without a critically damaged credit history and the lender will minimize its loss.
Is a short sale a good deal for a buyer? The answer to this question seems like it should be a simple and straight-forward “YES”. However, it is surprisingly a very hard question to answer. The common belief on the street is that short sales are trading for 20% – 40% below market value. While that may be true in some cases, the reality is that most short sales do not sell at steep discounts. In fact, many short sales today are selling at or just slightly below market price. Unfortunately the media and shameless companies trying to sell access to foreclosure databases, continue to create unrealistic expectations in buyers.
Advice from the trenches. When looking for a deal in real estate, don’t limit yourself to foreclosures and short sales. Many homeowners are feeling the crunch and simply want to unload a real estate asset before they become a short sale statistic. If you do find a short sale to pursue, here are three key pieces of advice:
- Be patient. Most short sale transactions take several months. There is a movement to streamline the short sale process, but so far this hasn’t helped too much.
- Seek experience. Work with an experienced short sale real estate agent. Make them give you a resume of qualifying experience. An experienced agent could save you some heartache and headache in the long run.
- Be realistic. Don’t expect 50% off and you won’t be disappointed. Remember, you only read about the unbelievable deals because they are sensational. The vast majority of average deals are just not as exciting.
Hopefully this article will give you some realistic insight into today’s market. If you have specific questions, please do not hesitate to post a comment and I will get back to you with an answer.