Intro To Short Sales

Although I have not been asked to represent the seller of a Short Sale as yet, buyers frequently ask me if I think they should actively pursue a Short Sale.  The term Short Sale refers to properties in which the owner owes more money to the lender than the property’s value. These properties are said to be “under water” or “upside down” but they are not bank owned (REO).  Since these are complex transactions with many serious consequences for the sellers as well as the buyers, I took an intensive class on Short Sales recently so that I can work effectively on behalf of my clients if they decide to participate in a Short Sale as either a Buyer or Seller.

Having heard the horror stories, I wanted some basic questions answered:

1. Why do they take so long to get accepted?
2. Why, if they do close, do they take so long to close?
3. Why do some of them fail to close after months of good intentioned work by the homeowner, the buyer, the agents and the lenders?
4. How do I protect my clients, either Buyers or Sellers, from the uncertainties and pitfalls inherent in Short Sales?

The simple answer to the question as to why these transactions take so long to be accepted and to close is that the lenders have historically large Short Sale inventory and relatively small Loss Mitigation Departments.  The servicer of the first loan may have as many as 500 files on her desk! 

In addition to government regulations, most lenders have their own set of rules and requirements that must be followed.  There is a great deal of information required from the owner to prepare a complete file which is the first step in the process.   Fannie Mae and Freddie Mac are asking for improvements in the handling of Short Sales.  Rather than wait for these changes, I recommend using one of the servicing companies that facilitate the process with the first lender.

Next blog, time to close.

 If you’re interested in investing in foreclosures, check out ForclosureRadar for a 3 day free trial for lists of Notice of Defaults and Trustee Sales.  www.foreclosureradar.com

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Tags: buyers, demand, Foreclosure, Loss Mitigation, Notice of Default, Real Estate, REO, sellers, short sales