We receive a lot of questions about short sales. Below are a few of the frequently asked questions about buying a short sale property. We add to this section as questions are raised so you may want to check back often. If you have a specific questions that we have not addressed, send it to us by email and we will send you a response ASAP. The email address for short sale questions is Ron@UrbanTeamAZ.com.

Also, check out our In The News section as it has lots of articles from around the country on short sales. The list goes from oldest to newest. 

 QUESTIONS A BUYER OF SHORT SALES MAY HAVE.

Q)     What exactly is a short sale?

A)     A short sale is a type of real estate transaction that occurs when the home owner owns more to his lender/s than the current market value of the home. Although the home is sold by its owner, the purchase offer has to be approved by the bank or investor who holds the loan.

Q)     I’ve heard it takes a long time to complete a short sale, is this true?

A)     Yes, buying and selling a home offered as a short sale generally does take much longer than a non-short sale purchase. The actual time depends on a number of variables.

Some banks respond to a buyer’s offer in as little as 3-4 weeks. However, the majority of the lenders are taking 2-3 months just to respond to a purchase offer. We looked at 300 short sale transactions conducted over the summer of 2009 and found, on an average, it took 100 days from the acceptance of an offer to close of escrow. Patience is a big virtue when buying or selling a short sale.

Q)     Will the home seller make repairs to the home if I find out there are problems?

A)     This varies on every transaction. In general, the home buyer will be asked to sign an “AS IS” addendum as part of the purchase contract. The “AS IS” addendum puts the home buyer on notice that the home is being offered in the condition you see it and no repairs will be made.

There are requirements under the purchase contract and the AS IS addendum for some items to be in working order. A phone call about this subject is needed to go over the various possibilities.

Q)     If the home owner accepts my offer does the lender have to as well?

A)     This is probably one of the most confusing parts of buying a short sale home. Normally a buyer negotiates the purchase price with the home owner and you are done. However, with a short sale it’s a different story. Here is what we see on most short sales.

The home seller’s agent will list the home. He or she will try to get a few people to submit offers and present them to the home seller. The seller's agent then submits the best offer to the lender/bank for approval. The bank will compare the appraised value of the home with your offer. If they like what they see they may accept it or not. The lender may order the seller’s agent to send a counter offer to the agent who is representing you.

Short sales have a lot of variables so there is not cut and dry answer to this question. We believe the process will be more streamline in 2010 and may things much easier for all.

QUESTIONS A SHORT SALE SELLER MAY HAVE

July 2010 Update: If your lender is operating under HAFA guidelines the rules and qualifications will be much different than often described below.

What is a short sale?
A short sale is when your Lien Holder(s) agree to accept less than you owe in order for you to sell your home. They agree to a discount of the mortgage debt owed.

Why do lenders or banks accept discounts?
A Lender or bank takes a discount or agrees a short sale because it saves them money. It gets bad debt off their books so they can reinvest that money by giving out another loan to a customer. On average a Lender loses between $30,000 to $80,000 on each property that they take back as a foreclosure.

Will every lender or bank allow a short sale?
The answer is no. The majority of the lenders do short sales however; there are a select few that do not do short sales.

Who qualifies for a short sale?
Most everyone who is facing a true financial hardship qualifies for a short sale. However, each Lender and Loan Type has a different set of requirements specific to them. The general requirements for a seller to qualify for a short sale are: A provable financial hardship, behind on payments or facing imminent default, No equity in the property being shorted, no liquid assets, and a lender or loan type with a clearly defined short sale process.

Will Lenders or Banks do short sales if the mortgage is current?
Some Lenders will entertain taking a discount when a homeowner is current on their mortgage. If you are current on your payments, we recommend you contact an attorney to explore your options prior to making any changes.

How long do I need to be in default before I can start a short sale?
This depends on the Lender. Some Lenders require a property to be 90 days in default before they will entertain a short sale offer; other Lenders will entertain a short sale even if it is not in default.

Can the owner of the property also be the listing agent?
Good Question! There is absolutely nothing wrong with that set up. However, the owner or spouse of a short sale can not profit from its sale. So, you can not earn and keep any commissions for the sale. 

What is required to process a short sale?
Every Lender or Bank has its own set of required information and some may even have a set of
paperwork specific to them. But, in general, most banks require at least the following:

• A handwritten hardship letter or hardship affidavit
• Financial statements
• 2 years tax returns
• 2 months bank statements
• 2 months pay-stubs

Throughout the process additional paperwork may be requested. So, be sure to keep everything handy. We have samples of many of the forms required for a short sale in the FORMS section on our home page. Look for the forms tab on the left.

What is the process?
The steps of the process are always changing with new government and bank guidelines. We'd be happy to talk with by phone or appointment to give you the most current information. There is no charge for this service and we are happy to help.

Can 2nd Mortgages or junior liens be discounted?
Yes, absolutely. In fact, if the first mortgage is being asked to accept a discount, they will require that all other lien holders discount as well in order to give short sale acceptance.