Short Sales & Myths - Revisited

I have posted on this subject before, but as I talk to buyers everyday, I feel once again we should discuss the reality of the short sale.

The definition of a short sale is this - the home needs to be sold, and due to market conditions, it is clear that the home's current value (and subsequently its likely sales price) will be less than the seller paid for the property. Most of the time, this is due to the fact that the seller originally purchased the home somewhere between late 2003 and late 2005, when Sarasota's home values were increasing exponentially.

I find buyers greatly misunderstand short sales. Here are some myths I can dispel for my potential buyers.

Myth # 1 - The Seller is in financial crisis - While some sellers may be in a financial hardship situation, others simply need to sell for another reason. For instance, if they are offered a job in another state. They are up to date with their mortgage payments, but also realize that when they sell, the sales price will not cover their mortgage payoff.

Myth # 2 - The bank will be happy to take anything - The fact is, during the short sale process, the bank (and every other debtor or lien holder) is still trying to get the most they possibly can for the home. An offer submitted for a short sale is often not responded to for several months - could they be waiting on a higher offer?

Myth # 3 - The list price reflects what we can get the home for - Much to everyone's frustration at times, the bank often gives the listing agent virtually no guidance as to what they will accept. Remember, they are going to lose money. They would rather not specify how much they are willing to lose. That being said, the listing agent, God bless 'em, is left to set a price on a home , not knowing if the bank would accept it or not. What this results in are alot of folks who see a price that seems too good to be true - and often is.

Case in point - some buyers of mine recently came across a home listed for $225K. It was beautiful, and close to downtown - and in their price range! It was a short sale, but they were adamant this was their home. We made a full price offer, after ascertaining the value to actually be about $100K over the asking price. We later found out that the bank would not take an offer less than $300K. Being well out of their range, my buyers were crushed after having their hopes raised so high.

There is an upside to some short sales - if you can wait out the bank, are willing to be flexible, and get a bit lucky, you might get a great deal. But this type of home buying is not for the faint of heart. Can I show you a nice home right down the street...???