Living in Portland

In simple terms, a short sale occurs when the seller of a property owes more than the property is worth.  The property may or may not be in the process of foreclosure.  Agents often list ’short sale’ properties on the MLS but they do have to clearly state that fact.

Are these a good deal?  NO, and here’s why.  The Seller can basically accept any offer he deems reasonable but in reality, he doesn’t have the authority to sell the property.  The ultimate approval is with the bank, and if there is a second mortgage (which is often the case) then two banks are involved.  Banks don’t like to loose money even if the property is in the process of foreclosure.  Adding to the mix is the fact that if the first mortgage bank forecloses, they receive more money because the second mortgage bank gets nothing.  In a short sale negotiation, both banks have to agree on how much money they will each receive AND the closings costs which include real estate commissions have to be paid first. 

In my 17 years experience, I have yet to have the banks agree to anything prior to the closing date.  The Buyer is left to gamble the cost of the inspection and the appriasal (approx. $900.) in hopes that the deal will close.  The Buyer is also gambleing that the sale will close on time and before his 30-day interest rate lock expires.  Banks don’t care about the Buyer’s out of pocket expenses or their interest rate lock, so the Buyer is at the complete mercy of the process (incredibly stressfull).  If the Buyer has given notice to a landlord or sold their previous home, there is also a good chance that they will be homeless during this waiting period.  I have seen the closing date go beyond 30 days many times as well as never closing at all!

My advise, never try to purchase a short sale.  Wait until the property has been fully foreclosed and is owned by the Bank.  Pre-foreclosures are even worse  than short sales.