What is a Short Sale and why do you care? A short sale is when the owner owes more on the loan than the property is worth. A house might now be worth $300,000 but have a mortgage of $500,000 on it. So the bank, the lender has to agree to do a “short sale” where they take less than the full amount of the loan. Why would a bank do this? Well the government encourages this plus it usually costs more for them to foreclose on the property and then resale it then to do a short sale.
If you are a buyer you have to be patience as a short sale takes longer than a regular sale. But you may get a little better buy than usual. Also supply of homes on the market is limited. You first make an offer and it is presented to the seller. Right now most homes have multiple offers. After the seller accepts an offer, you then wait until the bank responds. They are usually faster now so you may hear in 30 to 60 days. But it could take longer. Then the bank has to either accept your offer or counter. They will usually get an appraisal on the property for their use.
Once you reach an agreement with the lender (on the short sale property), you then open escrow and get your inspections on the property. The seller and the bank are not going to do repairs though. The seller will not receive any money from the sale. (Sometimes the seller may receive some money for moving expenses). If the repairs needed are higher than expected you can try to renegotiate with the bank again. If they won’t budge on the price you then have the option to either cancel or continue the sale at the agreed on price.
It’s a little more hassle doing a short sale, but it’s often worth it! Call me, Eileen if you have more questions on short sales or want to see any properties on the Monterey Peninsula! (831) 277-9939