Short Sales- What It Means For Buyers

A short sale happens when the lender settles for less than what’s owed to avoid foreclosure.  I’ve heard the average foreclosure costs the lender over $40k, often making a compromise worthwhile for both sides.  Today, more than 300 homes are listed in the Boise Metro subject to short sale.   If you are shopping for a home or investment, it is very likely you’ll come across one.    

Don’t expect a fast closing.  It can be weeks to months after an offer is accepted by the seller, depending on how far into the process the seller is.   The seller must initiate the process by claiming hardship with their lender and submit financial statements as to their ability to pay.  The lender must determine the current value, weigh the costs against foreclosing, and get approval from the investor if the loan has been securitized.  During all this, the home may be in foreclosure.  In my experience, lenders are willing to delay the foreclosure sale if the seller has a viable offer.

Look for pre-approved short sales.  If the lender has pre-approved the asking price, you may be delayed only a few days, which also makes the window for competing offers much smaller.   If not pre-approved, then the seller’s acceptance subject to lender approval means almost nothing.  Even if your offer is accepted by the seller in first position, the seller can keep taking back-up offers until the lender makes a decision, playing all buyers against each other in a bidding war of sorts. 

It’s a good idea to reserve the right to withdraw your offer at no penalty prior to lender approval, in case you find a better deal or can’t wait any longer.  After weeks or months the lender can also reject or counter any offer.  I have a client who outlasted and outbid all competing offers, waited 3 months for lender approval only to have the lender ask for $3k more.

If the price sounds too good to be true- it might not be.  With the larger numbers of troubled borrowers, slow sales and pressure on lenders to avoid foreclosure, I’m seeing larger discounts.  Discounts in the 10-20% range are certainly possible under current market conditions.

Dan Rowe ABR GRI CRS, Broker/Owner of Dan Rowe Realty, Boise Idaho www.repomandan.com 

Since 1991, specializing in Buyer Representation & Repos; pre-foreclosures, foreclosures, foreclosed homes, HUD Homes, VA Homes, Bank-owned homes, Bank REOs in Boise, Meridian, Eagle, Star, Kuna, Nampa, Caldwell & Middleton Idaho.