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Realtors get asked this question a lot. And the answer is simpler than people might think. Aside from the fact that the sellers are in a distressed situation, the process itself is not too much different than a regular home purchase. The main difference is that the bank(s) holding a lien on the property will have to be involved in terms of final selling price since the home will sell for less than what is owed on the property. By definition (according to the National Association of Realtors) a short sale is “a sales transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan”. So naturally the bank would want to evaluate whether or not the offer that has come in on the property is an acceptable one.
How is a Short Sale Different from a Standard One?
The process itself entails the usual – the seller lists the home at the selling price they have come up with under consultation with their Realtor, potential buyers view the property and then an offer or offers come in on the property. The seller then evaluates any or all offers and then makes the decision to accept (or reject) them. Once accepted, the seller than takes it to the lender.
This is where the process deviates from standard home purchase procedures. Once received by the bank, the offer is passed through to the institution’s loss mitigation or compliance department.
What Happens Once My Offer Reaches the Bank?
Keep in mind that at any given time, a loss mitigation officer or loan negotiator may have several hundred short sale applications on their desk. Not only do they carefully study all comps on the property and evaluate whether the short sale carries value to them in the long run, but they also have to contend with the sheer volume of these transactions lately.
The outcome can be one of several things. First, the bank can choose to accept the offer given. They can also choose to come back with a counteroffer. Finally, if after careful evaluation the reviewer decides that the loss is too much, they may opt to reject the offer altogether.
What Can I Do As a Buyer To Help the Process?
The single most important thing that a buyer can do to help the process along is to remain patient. Once the agreement of sale is signed and sent to the bank, the process begins and it can take a painstakingly long amount of time. Realtors are often unable to obtain updates on short sales that are in progress because of how slow the process is at times. Maintain an open line of communication with your agent but also be realistic in your expectations. If your expectations are reasonable, it will help to ease any frustration for you and Realtor as you both wait for a response to your offer.
Another very useful tool when buying a short sale property is to be working with an agent that is well versed in short sales. There are many different aspects to this type of transaction as compared to a traditional sale and by working with an agent with experience in the field you can save a lot of time, energy and money in the long run.
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Remember, as things take a while to come full circle – it is essential that you keep your eye on the prize. Though a bit more tedious than normal home purchases might have been, you will undoubtedly be getting a great deal and the patience required in doing so is very well worth it!
