Buying a Los Angeles Home. What is a Short Pay?

By
Real Estate Agent with Power Brokers Int'l BRE# 01439865

I often get a request from people buying a Los Angeles home as to what the disclosure “Short Pay” means.  This is a brief overview of the process.

Short Pay is actually the same as Short Sale.  A short sale means that the homeowner is upside down on their Los Angeles Home Buyers.  What is a Short Pay?mortgage,

What does this mean for a Los Angeles home buyer?

The homeowner owes more on the mortgage than the home is actually worth.  Instead of sitting in the home without making the monthly mortgage payments, or strategically defaulting (able to afford the payments but choosing not to continue), the homeowner tries to sell the property at market price.

Understand that because the homeowner owes more than the home is worth, the lender is going to expect the home to sell at market price.  There is little or no negotiation on a short sale.

Escrow is not opened until after lender approval, and generally no deposit is paid until that time.  So there is no risk to the buyer.  However, depending on the expertise of the listing agent and how many lien holders there are, the length of the short sale process can vary and can take up to several months.  It is also possible that the sale will not go through.

So if you are a Los Angeles home buyer considering a short pay you need to be in it for the long haul.

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Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Greg,  thank you.  That's what confuses people.

October 23, 2012 01:54 PM #2
Rainmaker
444,142
Patty Da Silva, Davie, Southwest Ranches Cooper City, Plantation, Weston, REALTOR
BROKER of Green Realty Properties® - 954-667-7253 - Davie, FL
Top Listing Broker

It's interesting to see the differences from other parts of the country. We collect the deposit within 48 hours of the effective date down here.

October 23, 2012 01:57 PM #3
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Patty,  I am not a short sale expert, but the two I was involved in we put money in when escrow opened.

October 23, 2012 01:59 PM #4
Ambassador
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Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

Jane,

Local custom I assume. I've never heard the expression "short pay." You learn something new in the Rain every day.

Rich

October 23, 2012 03:03 PM #5
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Richard,  for some reason that's what our MLS uses.

October 23, 2012 04:21 PM #6
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William Johnson
RE/MAX Associates - San Diego, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE
Hi Jane, a excellent explanation. These blogs do a great job of explaining to Buyers and Sellers various questions that they don't actually pay attention to until it becomes a part of their lives in some way. We need to keep this blogs coming even though we might have a written posts similar a year or two ago. I think AR does keep the topics current and of greater significance to the consumer.
October 23, 2012 05:04 PM #7
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

William, you are correct.  The consumer needs to understand what they are getting into when buyng a home.  Some of the terms are very confusing.

October 23, 2012 06:04 PM #8
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Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

Wow..I haven't ever heard the term Short Pay before Jane...I learned something new today :).  Short Pay, or Short Sale, they are all difficult at times, but if you get all partys involved educated, one can get a nice home at a good price!  

October 23, 2012 07:14 PM #9
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Brenda, not too many buyers want to be bothered with a short sale, but it can pay off in the end.

October 23, 2012 07:43 PM #10
Rainmaker
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Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Never heard the term short pay before, but have definitely heard of short sales.  Thanks for the synonym lesson ;-)

October 23, 2012 07:51 PM #11
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Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

Great advice, Jane. Why put in an offer on a short sale unless you really want to wait for the property? It can take anywhere from 2 weeks to three (or four months) to close.

October 23, 2012 07:59 PM #12
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Carla,  :)

Melissa,  or longer in many cases.

October 23, 2012 08:01 PM #13
Rainmaker
639,493
Laura Allen, Lake Tahoe - Truckee Real Estate for Sale www.TahoeLauraLuxuryHomes.com
Coldwell Banker, Tahoe City, CA (530) 414-1260 - Tahoe City, CA
Tahoe Real Estate Agent Helping Buyers and Sellers

Jane - There are so many different terms used for the short sale process and you did a great job of explaining what "short pay" means.  This is why you are the agent to go to in the Los Angeles area!

October 23, 2012 08:15 PM #14
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Laure,  thank you very much.

October 23, 2012 09:08 PM #15
Rainmaker
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Michelle Gibson
Hansen Real Estate Group Inc. - Wellington, FL
REALTOR

Jane - Great explanation, I have never heard the term short pay used before.

October 25, 2012 04:50 AM #16
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Michelle,  I don't know why our MLS uses that term.

October 25, 2012 09:47 AM #17
Rainmaker
546,458
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

Jane-Interesting how the terms for these situations are polar opposites. You've got the short sale or short pay for the lender and the potential buyer has to be in it for the long haul.

October 25, 2012 09:43 PM #18
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Wayne,  I know.  Rather an oxymoron.

October 25, 2012 09:51 PM #19
Rainmaker
709,188
Juli Vosmik
Dominion Real Estate Partners, LLC, Scottsdale, AZ - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Jane, patience is the word.  It's too bad a short pay or short sale is called that - there should be a better term - long sale, put on your straight jacket and buckle your seat belt sale might be more appropros. 

October 27, 2012 01:59 PM #20
Rainmaker
883,564
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

Juli,  you are absolutely right.  Why that term is used is beyond me.

October 27, 2012 02:06 PM #21
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Jane Peters

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