Indianapolis Area Real Estate Blog

Short Sales Process For Buyers

 Short sales are NOT short!

In the midst of several short sale negotiations, experience tells me home buyers do not know what Short Sale means. While visiting a past client yesterday, she asked if a short sale meant the seller was trying to sell fast. In theory, that is usually the case. The seller is trying to sell fast to get out of a home they can no longer afford. In practice, it rarely happens fast. The process can be long and drawn out with twists and turns not found in a traditional home purchase. A short sale – in simple terms - means the bank or investor is being asked to accept less than is owed on the property. Banks and investors really don’t like losing money – who can blame them, most of us don’t! As a buyer, what does short sale mean for you?

Where are the deals?

Although there are deals to be had in short sales, you generally are not going to get a steal. Banks are fairly savvy and know what the value of the home is. When they start a short sale file, one of their first actions is to have the home appraised or what is called a Broker Price Opinion (BPO). Just because it is a short sale doesn’t mean they will accept any offer. They have guidelines which determine the loss they will take on a particular property.

You have to be patient!

This is not easy to do when you are waiting for an answer. If your offer is the first offer a bank has received on the home, your wait time will most likely be longer. Most banks do not want a short sale file until there is an offer. Being the first offer may mean a month to six week wait for an answer.

Banks always have the final word!

All offers are subject to bank approval from the sellers lender. Generally the bank will send a demand statement with their terms. You will then have the option of accepting their terms or not. Much like a counter offer, except the banks counter offer is final.

Property is AS-IS

Many banks have special addendums which state the property is being sold “as-is”. You can still have an inspection, but the bank will not be doing any repairs. Any repairs would have to be negotiated with the seller, but remember, the seller is facing foreclosure and may not have the funds to repair any inspection items noted for repair. Short sales are not easy or fast, but the rewards of equity can be a payoff for your time and patience. Much of the burden of the process lies with the agent who has the home listed and whether they have submitted a complete package to the bank.

A gentle reminder – your agent can not make the bank work faster – it is a process! Believe me, I have tried!


#1 By Gena Riede at 8/31/2008 5:57 PM

Your article on Short Sales was right-on. It seems as though Short Sales and REO's are plentiful in our market. Patience is certainly something needed when dealing with either on.

Loved your article.

#2 By Kathleen Couch at 8/30/2008 1:54 PM

A good post! Buyers aren't the only ones who don't understand short sales. I ran into a man who said he was an educator of agents, and said a short sale is the worst thing you can do to a seller! I tried to politely educate him but he refused, and got angry.

Keep up the good work, and may you be blessed with patience when working a short sale.

#3 By Bucks County Real Estate at 8/31/2008 4:10 PM

Great overview of the Short Sale and it's process. I was recently involved in one and it took 4 months to close on the property. I was working with Ocwen bank and I was calling them and faxing them every day. When you call them, you don't get a single point of contact. It's whomever picks up the phone, that's who you talk to. You need to have patience and the nerves of steel.

We finally closed on the property, but what a hectic process.

#4 By Paula at 9/1/2008 5:06 PM

Kathleen - Thanks Much! I really don't mind short sales when I know I am helping a seller who can't sell otherwise and a buyer who can get a reasonable price on a home. With the changes in Fannie Mae guidelines a short sale can mean buying a home again in two years versus four years for a foreclosure on a Fannie Mae loan. I believe that's a huge difference! Maybe your educator agent just doesn't realize the benefit to sellers.

#5 By Paula at 9/1/2008 5:08 PM

Hey Buck County - Yes it can be frustrating and time consuming, yet rewarding when it is finalized. I have one now which was supposed to close Tuesday and still no approval from the lender on the HUD. ARGH!

#6 By Paula at 9/1/2008 5:09 PM

Hi Gena - Thank You! Patience is key and especially for the buyers. We are in the trenches everyday with short sales, but the buyers don't know what to expect. Heck, with some banks, we don't know what to expect :)

#7 By Paula at 9/9/2008 6:34 PM

Hi Tampa - 16 in one week will keep you very busy. Good Luck! It takes an expert to do short sales.

#8 By Tampa Real Estate at 9/8/2008 8:28 AM

Totally agree. We have been doing a lot of these and we are getting 16 short sale listings this week. I think we will be the area expert before long :-)

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