Question - We've found a property on the MLS and the description says it's a "short sale." It seems like such a great deal, should we make an offer on it?
Well, the short answer is ... maybe!
Short sales are a reality in today's real estate market and they aren't going away anytime soon. Many of them appear to be priced very competitively and, because of this, we are asked this question frequently by our clients.
Whether or not making an offer on a short sale makes sense depends on a number questions. I'll walk through the main points below.
First, what is a "short sale"?
A short-sale is when a homeowner owes more on their property than it's worth on the market - they are upside down - and, due to a "financial hardship", they are forced to sell the property.
Because of this hardship, the bank MAY agree to "sell it short" - that is, sell the property for less than what is owed on it. A financial hardship can be a job loss, job relocation, medical issues, divorce, reduction in income, etc.
What do we need to know?
There are a few things we need to know in order to determine if you should make an offer on a particular short-sale property:
Does the listing agent know how to negotiate a short sale and get it to closing?
Does this particular short sale seem likely to close?
Does your (the buyer's) personal situation make a short sale desirable/feasible?
Getting the 411 on the listing agent
Short sales require a lot of work, skill, and experience from a listing agent. Negotiating with banks requires finesse, persistence, patience, and a special tolerance for dealing with bureaucracy that many realtors don't have. If the agent who has the short sale listed doesn't have that combination, the short sale won't go through and the home will be foreclosed by the bank. In other words, you'll wait a long time and you won't be able to buy your dream home.
We have a page-long questionnaire we ask listing agents to ascertain their level of experience with short sales. If we feel they do not have what it takes to get the deal done, we will recommend you not proceed with an offer.
Determine if the property is likely to close
Other questions on our questionnaire pertain to the property itself. How many liens are on the property? Who are the lien holders? How much is owed on the property? The answers to these questions can also help us determined if you'll actually be able to close on this property after waiting months to hear back.
Will it work for you? Did I mention it could take a long time?
Speaking of waiting a long time, short sales really should be called "red-tape" sales. And whenever there is a lot of red tape involved in anything, the process is slow. Short sales can take 6, 9, even 12 months or more to close! Does your personal situation allow for that much time? Do you want to put your life on hold for this particular home? Do you have the patience to wait - potentially with little update from the listing agent - while the gears slowly grind through the process?
The Iron Eagle Realty Team's mission is to assist you, our client, in the sale and acquisition of real estate properties in the state of Idaho, specifically the Boise Idaho Real Estate Market. Whether you are buying or selling a home, whether it is a foreclosure, short sale or equity property, we handle our customers and clients with empathy and honest truths so they can make informed decisions as they advance in the process of buying and selling real estate that meet specific needs.
Regards,
Michael Hon
CEO, The Iron Eagle Realty Team
Associate Broker, Silvercreek Realty Group
Certified Short Sale Specialist®
Investment Property Consultant
Direct: 208.919.0458 Office: 208.939.9033 Fax 208.514.1422
www.IronEagleRE.com Michael.Hon@IronEagleRE.com
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