What is a “short sale”?
A Short Sale is a transaction in which the lender releases its lien against the Property and accepts an amount less than the full amount the lender claims is owed.

How is a “short sale” different from a “foreclosed” or “bank-owned” property? The difference is who owns the property. With a foreclosed or bank-owned property, the lender owns the property. The lender may have acquired the property through a legal foreclosure process, or the previous owner may have surrendered the property to the lender in lieu of paying the mortgage loan. With a short sale, the homeowner still owns the home, but is working with the lender to negotiate acceptance of a short payoff on the mortgage.

What are the advantages of purchasing a “short sale” home over purchasing a “bank-owned” home?

SELECTION – Most investors or home-buyers are aware that foreclosed and bank-owned properties are available at bargain prices, so there is a lot of competition to purchase these homes. In reality, there are many more homes on the market that are in pre-foreclosure, or “short sale” situations, so the selection is greater, and the competition for these homes is much less.

PRICE – Banks and lenders incur significant expense – attorneys fees, holding costs, property preservation costs – to foreclose on a property, get legal title, put the home back on the market, and maintain the condition of the home. Banks and lenders DON’T WANT to foreclose on homes, and increasingly are more willing to negotiate a short sale offer at bargain prices for the new buyer, rather than try to recoup those extra costs after a foreclosure.

CONDITION of HOME – Generally, short sale homes are in much better condition than bank owned homes. In a short sale, the homeowner may still be living in the home, or may have only recently moved out. The foreclosure process is a long process, and may take more than six months in the state of South Carolina. During this process, the home is often left vacant, with no utilities and not maintained. The condition of the home deteriorates because it has been left vacant, not heated or cooled, not cleaned or maintained. Foreclosed and vacant homes are frequently the subject of vandalism and prone to undetected damage from severe weather and pests.

TERMS – Banks DO NOT want to be in the business of owning and selling homes, and are increasingly more flexible in negotiating terms, such as closing cost assistance and closing date, on a short sale. Once the property has gone through a foreclosure, the bank is eager to simply get the home sold, and is not interested in negotiating terms to your benefit! Agencies such as Fannie Mae, Freddie Mac, and HUD, have strict guidelines they must adhere to, and are restricted on which expenses and closing costs they will pay. Occasionally, the buyer may even be asked to pay certain costs normally paid by the seller in other real estate transactions.

What are the disadvantages of purchasing a “short sale” home over a “bank-owned” home? TIME – Once the bank owns the property, they can make a decision on your offer very quickly, usually in a week or less. Because of the nature of a short sale, the negotiation process will take some time. Depending both upon the lender, and the motivation of the seller to get required documents submitted, the decision to accept or reject your offer may take as much as 60 days. To shorten this process, be certain to work with an agent who is a Short Sale Specialist, and can advise you of the liklihood of your offer being accepted and the projected time frame for closing.

How can I learn more about purchasing a “short sale” home? Register to attend one of our FREE Home-Buyer Seminars, to request a personal consultation appointment with a Short Sale Specialist, or to send us an email with any specific questions you may have.