From reality shows about flipping homes to infomercials that promise you’ll get rich quick, the message is the same: Buying a home that is facing foreclosure (also know as a "short sale") is a sure way to financial security. However, considering all the hype surrounding short sales, it’s important to separate the facts from the fairy tales. There are some important points to consider before you waste alot of time chasing after these deals.
What Exactly is a "Short Sale"?
It’s when the bank agrees to accept a discounted payoff when a property sells for less than what is owed on it. Here’s how a home usually ends up in this category:
Why Does the Short Sale Process Take So Long?
The homeowner who is facing foreclosure decides what the selling price should be for the home without knowing what the lender and loan servicer will accept. As a result, what might sound like a great price could end up being rejected by the parties who provided the loan. When a buyer makes an offer on a home that is facing foreclosure, most of the time the bank is not the one that holds the note. The offer has to be presented to the investor who bought the mortgage-backed security for approval. According to one manager from a large, national loan servicer, the lender needs to present the loan investor with a short sale package that includes:
Short Sales Aren't Alway A Great Deal
What is really noteworthy is that it is not unusual for the lender to reject an offer for a short sale, only to list the property at a lower price once it has gone through foreclosure. This is occurring much more frequently in the Santa Maria area, and as a result, buyers are advised to shop for a bank-owned home instead of a short sale. Not only is a short sale a long process, but it may not be the great deal you’ve been lead to believe.