Whether you're a first time home buyer, an investor, or looking for a way to move up to a better home in a better neighborhood, buying a short sale may be a great opportunity. And knowing something about the short sale process may help you to take advantage of that opportunity.
That is the message Bryon Ellington introduces in this latest shared video. If you've already begun your search for a new home, or even if you have experience investing in properties, you may or may not be aware of the advantages that buying a short sale can provide.
WHAT IS A SHORT SALE?
What is a short sale? A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts owed against the property.
This comes into play when the property owner cannot afford to repay the full amount owed...in this scenario, the lien holder may agree to release the lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency.
In this brief presentation, Bryon begins by highlighting three key differences between the short sale process and a traditional transaction.
The first difference in buying a short sale is that you will have a lower average sales price.
The second difference in the short sale process is that it generally takes longer to close.
And the third primary difference is that the short sale of a property may very well involve more than just the seller's lender (For example: additional mortgage investors, second & third lien holders, and possibly one or more attorneys)
Bryon then goes on to detail a recent study showing that properties sold via short sale can take up to 62 days for the lender to respond to a buyer's offer. That same study also shows that once the lender accepts an offer, it can still take as much as an additional 67 days to close.
TIMELINE OF A SHORT SALE
To further illustrate his point, Bryon shares with us a timeline that was based on one of the short sales from the study.
Day 1: The owner of a house misses a mortgage payment - or realizes that the house is worth less than what he owes the lender.
Day 7: The owner talks to a real estate agent. The agent prequalifies the home for a short sale.
Day 13: The owner signs a listing agreement with the agent.
Day 25: The agent submits the short sale documents to the lender.
Day 35: The lender creates a short sale file.
Day 50: The lender assigns the property to an independent appraiser or agent for an estimate of property value. Also known as a broker's price opinion (BPO)
Day 65: The lender reviews the results of the appraisal.
Day 90: The agent receives a letter of sale approval for the house from the vendor.
Day 110: The short sale transaction is closed and the property is sold.
After demonstrating with this timeline just how long the short sale process can take, Bryon goes on to stress that no timeline is standard for buying a short sale, and even says, "your short sale timeline will almost certainly vary from this example."
In closing, Bryon reminds us of the most important point to remember, which he mentions in the beginning. The point being that while the short sale process can require a lot of patience, the opportunity and payoff can be big.
I hope this video helps answer the question, "what is a short sale?," while aso providing some insight into the pros and cons of the overall short sale process.