The pros and cons of a short sale

BEL AIR. Md. -  

Mike Spurrier is moving his family into their new Abingdon home; the perfect house, perfect neighborhood and at the absolute right price.

"Instantaneously, you got a house worth more than what you paid for," Spurrier said.

Because mike didn't just buy in today’s buyer’s market, he targeted a short sale; a house where the seller has to get out of a previously much higher mortgage, the bank is looking to take a loss to avoid foreclosure and the home is priced to move.

It's a simple concept and normally a steal if you can get it, but the process of settling a previous loan, approving the new amount and streamlining sometimes two or three mortgages on the same house can take time.

"We could have had a child faster than we got into the house but there are a lot of pitfalls along the way.  If you're going to do a short sale I would say that you got to be very patient, open minded and be in a secure living environment because you never know how long or what you're going to come across as you go through the path," warned Spurrier.

Mike came across a bank that meandered down its path, taking nine months to nearly complete the deal squeezing him and his family between where they were living and where they were trying to live.

But the short sale process may end up becoming a lot less frustrating. 

Banks are beginning to warm to the idea because it is more efficient and less expensive than a foreclosure, Wells Fargo who owns a lot of mortgages in our area told ABC2 by phone they have streamlined the process resulting in more short sales in 2011 than in any point in their history.     

"I think the banks are opening up their eyes and listening.  They're listening to the consumers."

 Barbara Prichard is a realtor with Garceau Realty.

She says banks like Wells Fargo are beginning to recognize the market for short sales by the increasing amount of buyers looking to cash in.

[Two years ago, did anyone come to you asking for a short sale?] “ No. No,” responded Prichard.  [And now?] “Absolutely, probably weekly."      

Prichard estimates 20 percent of her clients are looking for a short sale now; a successful purchase of which could land them a 20 percent discount on a home.

All enticing numbers but they can come with pitfalls; a short sale is normally sold as-is, the distressed seller must be approved by the bank for the short sale and the bank may take anywhere from  three to nine months to cross, a at times aggravating about of 't's' and dot a maddening amount of 'i's.'

        

 

"Here's what it comes down to,” Prichard said, “A willing seller, an able buyer and patience, patience, patience.  And understanding what you are going to go through and it is an absolute roller coaster.  But, the ride is worth it"          

After nine months, Mike Spurrier is hoping it is.

"We plan to make improvements of our own and we'll add equity on our own.  So automatically 20 thousand dollars equity is great, once we're done, maybe thirty of 40.  [And then the house]…becomes a home…exactly."

Both in his heart and his wallet.

 

Tips for surviving a short sale:

Patience, Patience, Patience:  While some banks are committed to moving these properties quickly with the right seller and buyer and have streamlined the process, others are not so clean cut.  The short sale process can be long and maddening .  Know what banks control which mortgages on the home and check to see if they have dedicated resources to the short sale process.

Be in a flexible living situation:  Since the process can take a long time, it is best you are in a forgivable lease (month to month) or don’t have a strict deadline to be out of your current home.  Short sales can complete in two weeks, nine months or even longer.

Double, triple check the home:  Since short sales are purchased lower than originally valued, the buyer typically gets no help from the bank that owns the property.  Therefore you are buying it ‘as is’ and any problem in the home becomes your problem.  While short sales are typically in better condition than foreclosures because the original owner is allowed to live there during the process, there can still be major repairs needed.  A thorough home inspection is key for purchasing any home, but more so in a short sale because the buyer is on the hook for the repairs.

Is the seller approved for a short sale?  Some homes are listed as ‘potential short sale.’  Check with your realtor or the bank that owns the mortgage that the person currently in the home is qualified to sell under a short sale process.  Banks typically grant a short sale to a seller because of financial hardship associated with divorce, health problems or loss of income.