The words don’t really need to be tiny. I have a decent vocabulary but long explanations of financial matters and insurance and things of that nature tend to cause me to glaze over pretty quickly.
Here’s the story: Occasionally I look at local listings and daydream about home ownership (really about having my own laundry room). Yesterday I saw a listing that seems in many ways perfect for me.
At the end of the listing I saw “Subject to 3rd Party Approval”, which a google search revealed to me means it’s a short sale. Further googling has me feeling as if I know what a short sale is. Almost everything about the mechanics of it is presented for the party making the sale.
What are the pros and cons for the potential buyer looking at a short sale?
I assume there must be more cons because there’s a house priced well below market in a very desirable neighborhood that’s sitting. Either that or it needs a new roof so nobody who’s looked at it has made an offer.
Thanks in advance.
(I put this here rather than in General Questions because although I feel as if there should be a definitive answer I don’t imagine that all Dopers will agree )
Someone else will be along to describe things in better details, but I know that short sales can be a very slow long process (months and months) while trying to get the bank that holds the deed to approve the short sale. At the end of the wait, very often the bank declines the short sale and the buyer has just wasted 6 months of their life waiting for nothing.
From wiki: A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.
Generally, a short sale is a sale in which the sale price will not cover the amount owed on the property. In some short sales, the seller covers the short-fall by making a lump payment to cover the difference at the closing. In other instances, the bank to whom the money is owed agrees to accept less than what is owed in order to complete the sale. Those are the short sales alluded to by Bob Ducca, the ones that can take a long time to close. If the seller “brings money to the table” the sale can close quickly.
Realtor here. Short sales are a nightmare from our perspective. Unlike normal sales, the bank is in the driver’s seat for short sales; banks are notoriously difficult and inflexible to deal and hard to communicate with. Long delays are common, and banks have some rules that they will not or cannot change no matter how stupid they may appear to be.
Banks will usually insist on “as-is” sales, no recourse, they may not allow inspections; they certainly won’t pay for them, and they may not provide a condition report listing known defects (as trustees, they may not know anything about defects, so their lawyers make sure they are not liable). It’s the ultimate Buyer Beware.
They will give you miles of forms to sign resolving them of any and all liabilities, even some imagined ones. They ain’t gonna take no chances, No, Sir.
If you, as a buyer, are willing to put up with this, you can sometimes pick up a bargain.
Thanks, all. That gives me the perspective I needed. It seems as if from the buyer’s end of things it’s a better option for someone for whom time is not a factor.
The last time I noticed a home in that neighborhood listed below market it turned out that it has an underground oil tank that needs to be removed, needs a new furnace, and almost all new plumbing and a new roof in no more than five years. (still available!)
Most of the time I’m happy with renting, but every once in a while I become disenchanted with my situation and look at listings. What I should be looking at is nicer rentals. Thing is, owning would be less per month than my current lease, which goes up in May.
I’ll get my own laundry room when my mom croaks. Well, I’ll get hers, but I’ll be able to do my laundry at whatever hour of the day or night I choose, and if there’s a broken ballpoint pen in the dryer, or a pillow tears open and makes pills of foam that get everywhere for weeks…(well there wouldn’t be either of those things, but if there were) I’d have no one to blame but my very own self.
I’ll second what **Musicat **said. The normal insane house-buying bureaucratic BS is basically doubled. That goes for short sales, and for bank-owned property as well. And sometimes it’s the case that there’s more than one mortgage outstanding, so you need to get the agreement of more than one bank. Short sales can introduce complications with your getting a mortgage as well.
Also, as a general observation, you need to be a person who’s pretty good with paperwork to attempt buying a short sale. You need to be well organized, attentive to the details, have an effective filing system, and have your finances in a good place. I’d expect a short sale to generate a stack of paper about two inches high.
I will say, though, that in some respects, you’re in a decent position to make a play for a short sale. It sounds like your timeframe, after May, is more or less open. Many people can’t even contemplate a short sale, because if they’re looking to simultaneously sell their house and buy another, they can’t be as open-ended about their schedule.
My SO and I attempted a short sale on a condo purchase back in 2009. There were no real cons except that the unit needed a bit of fixing up. The process didn’t really take any more or less time and wasn’t really any more complex than a regular purchase.
The main con is that it’s often indicative of a declining real estate market or a bad economy. The unit you are buying has lost significant value since the last person purchased it, that person can no longer afford the mortgage and the bank has agreed to eat the difference.