Buying a Short Sale - What To Expect.
Most people's motivation for buying a short sale comes down to one thing. Price!
One important thing to consider with short sales is that in many cases the list price means nothing!
What I mean by this is that most sellers of short sales don't care what price their home sells for as long as their lender agrees to accept the net amount of the sale as full payment for the amount the seller owes. The seller's motivation is simply to get out from under a bad situation. The seller receives none of the proceeds from the sale so, whether the home sells for market price or substantially less, it makes no difference to the seller. For this reason, a very aggressive, sometimes unrealistically low list price makes sense. In many cases, these sellers are facing foreclosure and it's a race to beat the deadline of the sheriff's sale that's looming. Receiving an offer is the first step to getting the sheriff's sale put on hold and it's common to see the list price reduced over and over until an offer is finally received. In many cases, by the time an offer is received, the list price has been reduced to a number that's far below what comparable homes are selling for.
An analogy:
Imagine going to the store. As you walk down the aisles, you spot many items on the shelf that are clearly priced lower than the comparable items around them. You find an item that you want to purchase, being motivated by the low price. You put the item in your cart and head for the checkout. After waiting in line for what seems like forever, the cashier looks at the item, looks at the price tag and then proceeds to say " sorry, we can't sell you that item for that price". At this point, you could pay a higher amount for the item ( a counter-offer ) or you could go back down the aisles to find another low priced item and start the whole process over again hoping that, eventually, you'd be able to actually buy what you wanted for the amount on the price tag. It really comes down to how much time you're willing to spend in hopes of buying at a discount. Another option would be to leave that store and go somewhere that the items could be purchased for the amount on the price tag.
If you're looking for the discount and that's your primary motivation, a bank owned home is usually a better way to go. These homes have already been taken back by the bank and have been priced at an amount the bank will accept. These can be really good buys but some will have additional hoops to jump through compared to non-distressed sales. An "approved short sale"( the bank has already approved the sale at list price ) is also typically a better option.
The one thing which must be considered when pursuing a short sale is time. While many of the banks have gotten better regarding how long it takes them to respond to offers, it's very possible that you could be waiting several months for a response and, that response may end up being a rejection of the offer or a counter-offer. The longest short sale transaction I've worked on took almost nine months to close! While this is a very long time, I know other agents who have had deals take even longer.
If you're a buyer who has plenty of time and doesn't mind waiting for something that may not pan out, it may be worth the effort and you may end up buying at a deep discount. On the other hand, you may be heading down a long road which ultimately leads to nowhere.
There are many variables when it comes to short sales and their success or failure. Working with an agent who knows their way around this process can eliminate some of the uncertainty, but not all. The bottom line is that you're trying to purchase something that requires the approval of a third party ( the bank ) to accept less money than they're owed.
