Defining a short sale
A short sale is a situation that occurs when a home owner selling their home will not net enough money in the sale to pay off the existing liens currently against the property. Since the seller cannot pay off the full balance of the liens at settlement, they are considered “short” what they owe. These liens often include what is owed to one or more mortgage companies. However, liens can also include unpaid taxes, association fees and other items.
Should I buy a short sale?
When a buyer makes an offer on a property that’s a short sale they need to be prepared for the entire transaction to take a good deal of time. The lienholders (mortgage companies, tax collectors, etc) need to analyze the entire situation before deciding if they will accept the buyer’s offer. In analyzing the entire situation, lienholders look at everything from the home owner’s income, debts, savings, reason for defaulting on their loan, and more. Because they look at so much information, the process takes a great deal of time.
We have seen situations where the sellers and prospective buyers receive an answer from the lienholders in 60 days and we have seen people wait close to a year. There is no guarantee on the time-frame – and there is no guarantee that the short sale will be approved at all.
Home buyers often find themselves waiting several months for a decision only to have the seller’s lender come back and say the only way the short sale will be approved is at a much higher price than the buyers had agreed upon in starting the process. Buyers are not required to agree to the lender’s terms, but if they don’t the sale is typically terminated.
This is just one of the many examples that home buyers need to understand and be prepared for when considering purchasing a short sale. Each transaction has a wide array of variables. It is important to deal with a Realtor who is very experienced in the process. Homes in Lancaster County have done well at maintaining value but we still see many short sales for various reasons.