This afternoon and evening I wrote a pair of offers on short sales here in the Phoenix real estate market. A short sale, for those not in the know, is a sale where the seller owes more to the lender than the current value of the home.
For instance, if the seller owes $300,000 but the current market value only is $220,000, the only way to sell would be via short sale, with the lender agreeing to write off the difference between the full mortgage and the current market value.
One offer was written on an “approved” short sale – the lender in the past rejected an offer and in so doing announced the price that it’s willing to accept to sell the home. The other is a traditional short sale where the lender has yet to show their hand and the list price is more a reflection of the sellers’ need for an offer to submit to the bank.
Each is going to take a decidedly different road from this point forward …
The Approved Short Sale
There’s an old joke where the punch line is “we’ve already established what you are; now we’re just haggling over the price.” That’s more or less where you stand when placing an offer on an approved short sale. The lender’s already indicated that it’s willing to accept less than what is owned on the property. Now it’s just a matter of haggling over the final dollar amount. Full price as listed in the MLS would do the trick but what’s the fun there?
The Traditional Short Sale
Full list price won’t necessarily do the trick here because the lender’s yet to decide that it’s willing to play ball and accept less than the amount of the mortgage. Maybe the mortgage is insured and the lender wants to cash in on the mortgage insurance. Maybe the lender’s either obstinate, ignorant or oblivious and doesn’t believe the seller’s really ready to walk.
Half the battle with a traditional short sale is waiting the six weeks or more it will take for the lender to decide they’re willing to approve the sale. After that, there’s another several weeks invested in the actual mechanics of the short sale – getting an appraisal or Brokers’ Price Opinion completed on the property, determining the needed bottom line, etc.
Where the buyers on an approved short sale may have an answer in a couple of weeks, the buyers on a traditional short sale may be waiting for a couple of months. Which is fine if you have time on your hands and have few variables involved from your end; cash is the preferable way to go because you don’t run any risk of watching your interest rate (or your exchange rate, for my Canadian friends) taking a detrimental turn while you wait for the bank to make a decision.
Either way, a short sale’s not the easiest road to hoe. There’s one agent in my office whose primary business in 2008 was short sales … knowing every trick in the book, she still had an average lender response time for three months.
The only people who will tell you that short sales are easy are trying to sell you something, and more likely than not it’s themselves and not the home you’re trying to buy. Want to try something a little easier, at least process-wise? Take a look at bank owned homes.
Got questions? Tobey and I have answers …
[tags]Phoenix real estate[/tags]