Chances are that if you’re looking to purchase a home in Westchester County today you will undoubtedly run into a short sale. A short sale, briefly, is when the homeowner is trying to sell the home for less than what is owed to the bank. The seller is asking the bank to forgive them for the difference between the market value and the amount they actually owe on the home. Although this concept has been around since the dark ages, many people are just hearing about it now during this economic downturn.
It is likely that the short sale home is so well priced that you as the buyer will most certainly be placing an offer on it–not at asking price of course! After all this is a buyer’s market. If the offer is reasonable, the offer will be accepted. But lets review what this really means; the offer was accepted on a short sale.
Who accepted the offer?
The sellers? No! The truth is that the seller does not care. He/she just wants this burden off their backs. The house could be sold for $1 and the sellers would be indifferent about it as long as they can get from under it.
The agent? Perhaps. But that means nothing since they don’t actually own the house. They know that getting a ‘reasonable’ offer is the easy part.
The attorney? What attorney? The loss mitigator or the seller’s attorney (sometimes the same person)? Regardless of who it is, the attorneys usually don’t get involve until there’s an offer on the table.
The bank? The bank probably told the sellers that they would not get involved in a short sale until there was a solid offer on the table. That’s where you come in. Your offer is the catalyst for the entire process. Remember, the bank or the mortgagor, is the one who makes the final decision–not the sellers or the seller’s agent.
Your offer being accepted means very little. What you want to hear is that your offer was approved by the seller’s bank. Or in some cases bankS (plural). Also, unlike traditional purchases where you submit an unbinding offer, the offer you submit to the seller’s bank must be a signed contract. A verbal offer is just that; an offer without substance or merit. Unfortunately, your offer won’t even be considered by the seller’s bank unless you’re willing there’s a fully executed contract or a contract signed by both the seller and the buyer. Note: that the home still does not belong to bank, so the seller must still sign the contract of sale.
You the buyer, and even the seller, may be thinking; why wouldn’t the bank take this offer…they’re just going to lose more money if the house goes into foreclosure? Word of advice…logic is not a term the banks understand. They surely didn’t use it when lending the money, why would they ever use it now. The person ‘evaluating’ the deal is probably sitting in a call center in some remote third world country getting paid minimum wage to use Zillow to determine the value of the $700,000 home in Eastchester that has a market value of $600,000, but someone is trying to buy for $500,000.
Obviously, every short sale transaction is different and will have different outcomes. I’m sharing my personal experience with short sales and by no means am I trying to deter you from pursuing such a purchase however, I think that before you jump on the bang wagon, you should be aware of what you’re up against. Please speak to your agent or/and attorney regarding short sales.
