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Is a Short Sale a Bargain?

Many people are under the impression that homes that are being sold as a “short sale,” are priced lower than market value. The short sale is new phenomenon where the mortgage holder is the ultimate decision maker on price, terms, and all aspects of the real estate transaction. But hey, many say, they are selling “short,” and therefore it’s worth the hassle to get the bargain.

It is “short?” Here are two nearly identical properties: both built in the last 6 years, both 3 bedroom, 2 bath, tile roofs, pool, and on Gulf Access canals. One priced at $534,900; the other at $449,000. Which is the short sale?

short-n-nonshort.gif

The $534,900 house is the short sale. A bargain? The $449,000 house is the one that was priced right and a “normal” transaction. It sold for $400,000. (If you would like MLS details on either of these properties, let us know and we’d be happy to send it to you.)

It can take weeks or months before the lender will even respond an offer. So that means a buyer and seller are on hold while the lender keeps the property on the market. All the usual protocols of offer, counteroffer, and acceptance are thrown out the window; the lender holds the cards. This means a lot of confusion, frustration, and sometimes heartache.

There’s a lot more to know about short sales, and we advise proceeding with eyes wide open if you entertain this option. And, yep, we know this is a controversial topic and undoubtedly we’ll get some passionate feedback on this one.

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One Comment Post a comment
  1. Jim Callihan, an Ohio Realtor, writes…

    Dave and Brenda: I’ve recently closed two short sales and can truthfully acknowledge that your description fits to a ‘T’. The first one, which I thought would pass through like a breeze took almost three months. The second, a beautiful five bedroom 2.5 bath on five acres in the country took almost as long. The last one was being held by GMAC mortgage and they drag their feet every chance they get. Getting information and feedback is almost nil, and as far as customer support, forget it!. I really thought I was going to get into a ‘niche’ market that would pay big dividends with little more work than a normal offer/acceptance contract, but this is far from ‘normal.’

    Anyone getting into this market should look around, ask a lot of uestions of active agents currently doing shorts and be open to disappointment in responses. I know of some ‘super effective’ agents that are burned out from these type sales. One agent in Columbus, Ohio could have as many of these as she could handle, but chose to go back to her bank owned, low rent neighborhood properties and not worry about the hassles given by these lenders. They treat the owners (borrowers) like dirt and never offer any more information than absolutely necessary. Also, there are programs being sold and advertised as ” be a millionaire in the short sale niche” that are nothing but common sense put on a 13 cent CD and sold for hundreds of dollars. I think these agents are taking advantage of an unknowing, clueless group of Realtors looking to ‘strike it rich.’

    Thanks for putting the word out to other agents. They should ‘take heed’ of this free advice.

    Regards,

    Jim Callihan
    http://www.TriCountyTeamRealtors.com

    August 20, 2007

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