The Story on SHORT SALES...

By Amy Hoak

RISMEDIA, March 26, 2009-(MCT)-Those searching for the best housing bargains on the market might consider buying a short-sale property, but there’s an important qualification for buyers interested in going this route: They need plenty of patience.

In a short sale, a homeowner’s lender agrees to accept less than is owed on the mortgage for the property. It’s a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.

“Over the past three to six months, the servicers have really become aware that short sales are the best way to reduce their losses when a modification is not an option,” said Travis Hamel Olsen, president of National Short Sale Center, a company that facilitates short sales nationwide on behalf of homeowners and real estate agents. The short-sale option also is less damaging to a seller’s credit than a foreclosure, he said.
A short sale can be attractive to a home buyer since the lender often will accept bids on the property that can be 10% or more below the market value, determined by the prices of comparable, nearby properties, Olsen said.
Although the mortgage balance is probably greater than the price a seller could expect in a traditional sale, the lender may be willing to take less than is owed in a short sale if this will help the lender avoid the further expenses of foreclosing and taking over the property. The savings, however, often come at the expense of a home buyer’s time.
“Short sales should be called long sales,” “In some cases, it could take months for a buyer to hear back from a lender.”
Are the savings worth it to you? Consider these five points before shopping for a short sale:
1. You’ll wait in the dark. Perhaps just as frustrating as the wait time is the fact that you likely won’t be privy to details as the deal is progressing. That could mean going months without an update.
2. Banks will make you a deal, but within reason. There are deals to be found in short sales, but don’t expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently, Jenson said. The offer should be aggressive, but not ridiculous. .
3. Sales are “as is.” In a short sale, it isn’t likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale, Jenson said. Do a home inspection and know what you’re getting into, but remember that your bid is for the property “as is.
4. Have a back-up plan. Even if you decide to bid on a short-sale property, it might be best to keep looking anyway.
“There is no guarantee with short sales, and if the buyer is smart, they will put an offer on a short sale they like and continue to look at properties that interest them,” It isn’t uncommon for people to find a home they like better and avoid the short-sale deal. When a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home. It may take months before the deal closes, even after the offer is accepted.
5. It’s not only about price. “One thing to not lose sight of is that you’re buying a house to live in. Buy a house you like,” It is recommended that prospective buyers remain open to properties of all types - short sales, bank owned and traditional sales - and compare prices and features.
A short sale is only a bargain if it’s a home that you truly want to live in - not something you’re drawn to only because of its low price tag.
© 2009, MarketWatch.com Inc.Distributed by McClatchy-Tribune Information Services.