Short Sale Hurdles
“Believe me, it’s not what it is.”
–What the cheating husband says to his wife when he’s caught in the act; New Yorker cartoon
Short sales have a (very deserved) reputation for presenting Buyers (and their agents) with multiple, patience-testing hurdles.
Because the owner owes more than their home is currently worth — a condition called “being underwater” — they can’t sell unless the bank(s) holding the mortgage(s) agree to take less than what they’re owed.
That process can take anywhere from 3-6 months, and is only successful about 50% of the time (the rest of the time, the property proceeds to foreclosure).
Listing Agent Blandishments
To overcome Buyers’ aversion to such headaches, I’ve now seen a succession of Seller strategies promising a faster, smoother process, with a higher probability of success.
So, first there were listing agents who touted that they were “experienced short sale agents” (a few were, most weren’t). See, “Experienced Short Sale Agent.”
Then there were so-called “pre-approved short sales,” i.e., suggesting the bank(s) had already approved the sales price — and presumably, agreed to the necessary write-off(s).
In my experience, sometimes “yes,” usually “no.”
Most recently, I’ve now seen at least one short sale agent promise a “cooperative short sale process.”
Versus what, an antagonistic one??
In truth . . . I have no idea what the term means.
Five Variables
Which isn’t to say that all short sales are equal, or have the same odds of success.
In my experience, the five variables that matter most are:
One. How many mortgages are there on the property?
One mortgage is workable, two considerably complicates things, three (including a home equity line of credit) is almost always fatal.
Two. What is the borrower’s financial profile?
If the borrower is making good money and has a strong balance sheet, no way the banks are going to take a haircut.
Demonstrable financial hardship . . . maybe.
Three. Exactly how underwater is the homeowner?
The larger the amount, the less incentive banks have to take a write-off rather than simply foreclose.
Four. Who are the banks?
Some banks are easier and faster to work with than others.
Or so I’m told.
Five. Who is the listing agent?
In fact, there really are agents who specialize in handling short sales.
When that’s the case, the odds of success truly do improve.
Unfortunately for Buyers, that merely makes waiting on a short sale a better bet — not necessarily a good one.
See also, “Short Sale Time Sink;” “Show My Short Sale — Please!!”; “‘Possible’ Short Sale.”
