Sunday, March 9, 2008

"Approved Short Sale" vs a Short Sale - BIG DIFFERENCE!!

There are a lot of homes on the market right now advertising that they are a ‘short sale'. In fact, for some of the searches I have done for client's literally ¾ of the homes pull up as a ‘short sale'. Just because someone advertises a short sale, does not automatically mean that the bank will sell it short. These folks, I guess at least 80% of them DO NOT HAVE APPROVAL FROM THE BANK TO SELL SHORT. Their agents have mistakenly guided them to believe that once they get an offer - that is the time to approach the bank with the belief that with something in hand the bank will somehow take their request more seriously. This couldn't be further from the truth.

Being approved for a short sale can be much harder than being approved for your original home loan. Essentially you have to qualify all over again and prove that you don't have the ability to make your payments. Yep, we are talking tax returns, paystubs, bank statements, letters detailing your situation, etc....Initially when you bought your home this was a minimum 3 week the banks are overloaded, understaffed and quite frankly, don't have the same incentive to get you moved through the system as they did when you were qualifying for your original home loan that was going to net them cash.
In addition to proving, or essentially qualifying with the bank to sell it short their must be a meeting of the minds on acceptable terms. Negotiating the terms of an acceptable sale can take days or all depends on the parties involved. Now as always there are exceptions, but as a rule, it is not as easy as submitting an offer from a potential buyer and hearing back from the bank in 48 hours.

I always ask agents, "Has this short-sale been approved by the lender?" If it has, then they should be able to provide you with the details of the approval. I don't show homes that are not "approved short sales". My buyer's time is valuable to them and once they are educated correctly, they understand that it just doesn't make sense. Even if you do decide on an "approved short sale" you still have to work with a bank. It's still ‘a roll of the dice' as to the ability of the bank to correspond to your buyer in a timely fashion.
A few banks have stepped up to the plate and have seen the value in working these sales efficiently but the majority have not and it can be extremely frustrating for all parties involved.
Here is what I tell my buyers, "I bet I can find you just as good of a deal being sold by someone that is competing against short sales and there will be disclosures, guarantees, repairs made, responses in a timely matter and we can count on the deal closing when it's supposed to." Now, doesn't that sound better?

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