Short Sales Not for the Faint of Heart!

Last week I attended a presentation on Short Sales and Foreclosures, taught by settlement attorney Judith M. Nixon of the law firm of Darby, Nalls, Smyth, Nixon and Muldoon in Rockville, Maryland. I was amazed to learn that 9 months ago most lenders wouldn’t even entertain a short sale, but for the last 6 months or so they have changed their outlook and are now allowing for short sales.

What is a short sale you ask? A short sale is when a seller’s lender will have to accept less than the amount due on the seller’s mortgage. Right now there are many short sales showing up in the DC, MD and VA market. We can generally tell when a listing in the MLS is a short sale because the remarks will contain a disclosure that reads “subject to third party approval”.

Thus far none of our clients have approached us about selling their home in a short sale. However, our buyers are starting to find the listings as they search the MLS. Some have emailed and called to ask if they should pursue purchasing homes that are being offered as short sales. My advice is that it is not for everyone. If you are interested in a home that is being offered as a short sale the most important trait that the buyer must possess is PATIENCE.

Because lenders are bureaucracies, and because the number of short sale cases has increased, there are simply not enough people at the lender’s office to address all the short sales that need attention. For our clients, that means that once you decide to write a contract on a short sale property you could be looking at literally months of waiting just to see if your offer is even accepted. As anyone who has purchased a home can tell you, waiting to hear a response to a written offer can be a very anxious time.

With that in mind, I certainly wouldn’t recommend writing an offer on a short sale property to our first time buyers. I think the more appropriate buyer for a short sale is an investor or move-up buyer who is happy in the house they are in and has been through the process before and can sustain the extensive waiting. Of course, if a first time buyer came to us with a strong desire to write an offer for a short sale property we would do everything we could to assist them. However, we would want them to know from the very beginning of the process that they will need lots of friends to help them keep their sanity as they wait and wait for the lender to respond to their offer.

As the market continues to change, I am pleased to learn and share more and more about the different types of sales we can expect to encounter in this unique housing market. If you would like to learn more about short sales, feel free to email me at Michael@RealAstute.com and we will delve even further into this interesting topic.