Buying a Short Sale

A Short Sale is a situation where a home is expected to sell for less than the sum of the mortgages, and the seller does not have the funds to pay the difference. When the net proceeds of the sale (after closing costs) does not cover the amount of the mortgages, several things happen.

First and foremost, the bank(s) gain control over the transaction, including the right to refuse it.

Second, the seller must cooperate by providing personal financial information showing their inability to satisfy the mortgage debt. Otherwise, the seller is completely out of the picture except for signing documents - the seller is no longer a part of any negotiations. Indeed, the asking price may be (and frequently is) less than the amount the bank will find acceptable. An offer above the asking price may be refused by the lien holders.

Third, the entire process is slowed down. An offer is communicated to the seller's agent, who then gets the signatures of the legal sellers. Then that offer if forwarded to the mortgage holders. The bank(s) holding the mortgage(s) may not have personnel assigned to negotiate prices or approve an offer. Therefore, an offer may not be responded to in a timely manner. It is common to request a quick response (a few days) for an normal offer to the owner of a home, but once it goes into a Short Sale status, a response time of a few weeks is more common, and even longer times often are needed: 60 days is recommended. Once the bank has assigned a coordinator, negative responses may be quick, but positive responses generally require a committee to approve, and they may only meet once per week.

Once a Short Sale is approved by the bank(s) or other lien holders, the closing itself often takes 30 to 60 days. Short Sales may take up to a year to close.

If any of the owners file for bankruptcy at any time prior to closing, the approval process will involve the courts which generally adds a year or more to the process. While it is possible to have the house removed from the bankruptcy proceedings (allowing the sale to proceed), that is time consuming and involves additional legal fees with no guarantee of results.

A bank may prefer to go through the foreclosure process instead of accepting a reduced price, especially if they believe the value offered is too low. Only a small fraction of Short Sales close successfully.

Short Sales are nearly always sold "AS IS", because the homeowner has no funds (or incentives) to make improvements, and the bank will generally not accept any contingencies such as repairs, unless such repairs are required by law prior to a sale.

The ONLY contingencies banks routinely accept are for financing and inspections.

The banks frequently refuse to pay portions of closing costs such as surveys.

Buying a Short Sale can be rewarding, but it also has its challenges.

There are other considerations which arise from time to time. To discuss buying a Short Sale, please contact Steve (Your Golf Home Pro) at:

Cell: (904) 662-0550

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