What Buyers Should Know About Short Sales.
Short Sale Transaction Information Form
1. A Short Sale is a transaction in which the Seller is attempting to sell the property for less than the amount of the balance owed on the mortgage to the Lender.
The Seller won't make any money from the sale of the property. The Seller's credit history and score will be adversely affected by a short sale.
The Seller must be behind in the mortgage payments, show the Lender that he/she is in a hardship position and can no longer make payments, and that there is no income or assets available to pay the loan.
The Lender has to decide whether to lose money now from the short sale or lose money later from a foreclosure.
2. The offer price is lower than the mortgage balance so the Lender must agree to take a loss equal to the mortgage balance minus the offer price and Seller's closing costs. Therefore, the Seller must first obtain agreement from the Lender that the Lender will agree to consider a short sale.
Unless the Seller has already obtained this agreement with the Lender to do a short sale, the Lender won't even look at a contract between the Buyer and Seller. Therefore, the Buyer should make sure that the short sale itself has the Lender's approval before investing time and effort in making an offer.
3. When the Buyer's offer is accepted by the Seller it becomes a legally binding contract. The Seller then submits the contract to the Lender for approval.
Lenders can take anywhere from 3 weeks to 4 months to reply to a contract. Usually it takes several months. The length of time for a reply is dependent on the workload at the Lender, how well they are trained and equipped for short sale transactions, their overall financial condition, and the local real estate market.
Even after several months, the Buyer's contract may be rejected or a counteroffer made by the Lender. At that point negotiations might be necessary among the Buyer, Seller, and Lender to obtain an acceptable contract.
If the contract is rejected or no approval can be negotiated, usually the property will be foreclosed on soon.
4. Because short sale transaction processing almost always takes a long time, the Buyer must have no expectation of obtaining fast responses or replies or decisions. Short sales are not for Buyer's who want or need a quick purchase.
4. Note that the contract is actually between the Buyer and the Seller. The Lender is only approving or disapproving it because they are the entity that will take the loss.