Just after the real estate and mortgage crash that started in late 2006, the term “short sale” was largely only known by investors. However, as more homeowners became delinquent on their mortgage payments and housing values dropped below what they owed on their loans, the short sale became the topic of a great many news articles.
It seemed like a great concept to offer a bank the option to take a sale amount below the amount owed, especially since the home couldn’t be sold for what was owed anyway. Unfortunately, banks and lenders resisted, either intentionally or through drawn out processes being handled by stressed out staff members with too many deals to handle.
At one time only around 20% of short sale offers ever made it to closing. In many cases, the months it took the banks to respond simply tired out buyers and they withdrew their offers. In other cases, the banks made counter offers that were unrealistic. In still more instances, banks kept asking sellers for the same documents over and over, delaying the process.
It’s become a lot faster these days, as banks have streamlined their process and they also look more fondly on short sale offers to avoid the expense of foreclosure. For the investor however there is still the consideration of time and what they could be doing with their investable funds instead of waiting months for a bank to respond to their short sale offer.
The investor with roughly equal choices for investment quality should weigh them carefully. If a foreclosure flip can be purchased and sold in half the time it may take to wind their way through a short sale, it’s probably a good thing to avoid the short sale deal. It could depend on the way the investor has structured their offer on the short sale. If they can withdraw it at any time prior to full acceptance by the bank, they could continue to do deals while they’re waiting.Doug Clark
Just after the real estate and mortgage crash that started in late 2006, the term “short sale” was largely only known by investors. However, as more homeowners became delinquent on their mortgage payments and housing values dropped below what they owed on their loans, the short sale became the topic of a great many news articles.
It seemed like a great concept to offer a bank the option to take a sale amount below the amount owed, especially since the home couldn’t be sold for what was owed anyway. Unfortunately, banks and lenders resisted, either intentionally or through drawn out processes being handled by stressed out staff members with too many deals to handle.
At one time only around 20% of short sale offers ever made it to closing. In many cases, the months it took the banks to respond simply tired out buyers and they withdrew their offers. In other cases, the banks made counter offers that were unrealistic. In still more instances, banks kept asking sellers for the same documents over and over, delaying the process.
It’s become a lot faster these days, as banks have streamlined their process and they also look more fondly on short sale offers to avoid the expense of foreclosure. For the investor however there is still the consideration of time and what they could be doing with their investable funds instead of waiting months for a bank to respond to their short sale offer.
The investor with roughly equal choices for investment quality should weigh them carefully. If a foreclosure flip can be purchased and sold in half the time it may take to wind their way through a short sale, it’s probably a good thing to avoid the short sale deal. It could depend on the way the investor has structured their offer on the short sale. If they can withdraw it at any time prior to full acceptance by the bank, they could continue to do deals while they’re waiting.Doug Clark