When the real estate market takes a turn for the worse, you may start to see many more so-called short sale listings. But what exactly are short sales and what does it mean if you are a buyer or seller?
Simply speaking a short sale listing is when the seller is trying to sell their home for less money than what they owe the lender. Typically, Salt Lake City short sales are more common in declining real estate markets because there are more people with homes in negative equity. If these people need to sell their home, and they do not have money to offset the loss then they need to perform a short sale.
Let us look at an example. Let us say someone purchased their home with a 100% mortgage for $500,000 two years ago and over the last two years, home prices went down 20%. This would mean that their home would now be worth $400,000. If for some reason they had to sell their home, (say they lot their job) then there is no way they could get the full mortgaged amount of $500,000, so they would have to perform a short sale.
The process for selling a short sale home is the same as a normal sale until such time that an offer is received. When an offer is received it is still up to the seller to either accept, reject or counter the offer, but the buyer also needs to sign a short sale addendum. The addendum acknowledges that the buyer is making a provisional offer for a short sale property and that the offer is subject to approval from the third party or parties (i.e. the bank). Once an offer is accepted, the Realtor presents the offer to the bank.
A banks process for dealing with short sale properties differs from bank to
bank and can take several months from start to finish. Once the bank receives an offer they start their due diligence process. When the due diligence has been completed either they will respond to the offer, just like the seller they can accept, reject or counter any offer.
If you are a buying a short sale property what can you expect? Well the first thing you can expect is to spend a lot of time waiting, if you need to move fast then short sale properties are probably not the way to go. Depending upon at what stage you join the process, you can be waiting anything from a few weeks to several months. Even though you can be waiting for a long time, when the bank does decide to move they tend to move fast, so once they have made their decision be prepared to move fast. The other thing you can expect is to be competing with other buyers. Because short sale properties have a tendency to be aggressively priced, they can attract several offers. Therefore, you may make an offer, wait for several months, and still not get the property. The other thing about short sales is that they are nearly always sold ‘as is’. Banks do not want the hassle or liability of having to fix problems found by a home inspection, so if you know there are problems do not expect them to be fixed by either the seller or the bank.
One other thing to note regarding short sales listings, is that via the public MLS interface, there is no way for a buyer to know if they are looking at a short sale listing or a normal listing. The only way to tell is to ask your Realtor, who has access to additional information not available through the public MLS interface.
Author Resource:-
Trela and her team of Salt Lake Realtors can help you with all your short sale listing. If you looking to buy a home then try searching the Salt Lake MLS, or read our Salt Lake Real Estate blog for more information on the local market.
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