A Word About Short Sales
March 31, 2009
It seems to be the case more often than not that when a property is listed as a "short sale" in a multiple listing service, it will have a list price that can be very competitive with other comparable properties. Somehow, to the inexperienced, the assumption is that this price has agreed to accept a pay off that is less than the amount owed by the seller. Unfortunately, this assumption is incorrect most of the time. Typically, the listing agent has done a market analysis and has suggested to the seller that the current market value is the price shown by the market analysis.
A seller planning to sell the property "short" will contact the lender and receive applications for a short sale which document the seller's reasons for needing a reduction in the pay off of the loan. The filing of the seller's application for a "short sale" is a first step and often is not connected to a possible selling price. Once the property is listed, and if the list price is attractive enough to buyers, offers will be made and negotiated with the seller. Once an offer is accepted by the seller, the lender is contacted and the offer is forwarded to the lender for approval. Until the lender approves, the sale cannot go forward. Waiting for the lender's approval can take weeks and months and requires a great deal of patience on the part of the prospective purchaser.
Why lenders are so slow at approving or disapproving a short sale offer is a mystery to both buyers and often real estate agents. Since the seller is usually no longer making payments on the loan, it would seem that getting the property sold would relieve the lender of a "toxic asset".
The bottom line as to why there are so many properties listed as "short sales" and so few actually "sold short sales" is this huge gap between offer and acceptance. If the offers are too low, a normal seller would counter. Lenders could also counter, but for some reason they seldom do. Hopefully this glitch in the selling of distressed properties will eventually be corrected and lender responses will be timely. In the meantime, the super attractive list prices of short sale properties may be an illusion.
It seems to be the case more often than not that when a property is listed as a "short sale" in a multiple listing service, it will have a list price that can be very competitive with other comparable properties. Somehow, to the inexperienced, the assumption is that this price has agreed to accept a pay off that is less than the amount owed by the seller. Unfortunately, this assumption is incorrect most of the time. Typically, the listing agent has done a market analysis and has suggested to the seller that the current market value is the price shown by the market analysis.
A seller planning to sell the property "short" will contact the lender and receive applications for a short sale which document the seller's reasons for needing a reduction in the pay off of the loan. The filing of the seller's application for a "short sale" is a first step and often is not connected to a possible selling price. Once the property is listed, and if the list price is attractive enough to buyers, offers will be made and negotiated with the seller. Once an offer is accepted by the seller, the lender is contacted and the offer is forwarded to the lender for approval. Until the lender approves, the sale cannot go forward. Waiting for the lender's approval can take weeks and months and requires a great deal of patience on the part of the prospective purchaser.
Why lenders are so slow at approving or disapproving a short sale offer is a mystery to both buyers and often real estate agents. Since the seller is usually no longer making payments on the loan, it would seem that getting the property sold would relieve the lender of a "toxic asset".
The bottom line as to why there are so many properties listed as "short sales" and so few actually "sold short sales" is this huge gap between offer and acceptance. If the offers are too low, a normal seller would counter. Lenders could also counter, but for some reason they seldom do. Hopefully this glitch in the selling of distressed properties will eventually be corrected and lender responses will be timely. In the meantime, the super attractive list prices of short sale properties may be an illusion.
posted by shirley harry at 8:36 AM
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