A. Foreclosures are often referred to as REOs, an acronym for the technical term, Real Estate Owned.

These properties have been sold or taken back at the foreclosure sale due to the previous owner’s

default on the loan(s). A Short Sale occurs when the homeowner wants to liquidate the property

however the debt against the property exceeds the anticipated sales price.

A. There are many contributing factors, the homeowner may have purchased at the height of the

market putting little or no money down. Perhaps the loan was an Option ARM (an adjustable rate

mortgage with an option to pay less than the actual principal and interest due) in these cases any

unpaid interest is added on to the principal balance. The result is the balance keeps getting larger.

Declining sales prices also play a role in the short sale phenomena as do personal circumstances.

A. If a seller lacks the funds to make up the deficiency (the difference between what is owed, plus

costs of sale and the sales price), the lender(s) in some cases agree to the sale in order to mitigate

their loss.

A. In many instances, yes. Foreclosure is a time consuming and expensive process. Each transaction

is unique and is handled on a case-by-case basis.

A. Homeowners often try to achieve a short sale in order to circumvent foreclosure. For many, avoiding

a foreclosure provides a “more graceful exit” strategy.

A. That depends. There are many factors; the seller’s motivation, advance or reserve pricing by the

lender, condition, amenities and location of property all play a role in the value proposition. The fact is

property value is subjective; it is often said a property is worth whatever a buyer is willing to pay.

A. Most assuredly! Lenders are overwhelmed and understaffed. Few if any standard procedures are  

in place. Frankly, it often takes several months. If you are very patient a short sale may be right for

you.

A. A few key points to consider; select a Realtor® skilled in the art of the short sale. Request a referral

to a reputable lender or mortgage broker in order to be pre-approved for the purchase. While some

lenders prefer cash offers you can position your offer for success by establishing the fact that you are

well qualified with prearranged financing. Be prepared to provide proof of down payment and credit

worthiness at the time your offer is to be submitted. If possible, be flexible with the closing date, often

lenders favor a swift close after the short sale is approved.

Q. Can you give me any tips on selecting a qualified real estate professional? 

A. You may have a close friend or relative in real estate, but if that person doesn’t know anything about

short sales, working with him or her may hurt your chances of a successful closing. Choose your

representative carefully. A qualified Realtor® will be able to show you short-sale listings, help negotiate

the purchase when you find the right property, and ensure smooth communications with the seller’s

representative. Not every short sale request is approved by the lender. Working with a knowledgeable

professional familiar with the process and possessing the necessary tools to properly package and

present your offer, will increase your chances of success. Be sure your Realtor® uses the standard

forms approved by the State Realtor® Trade Organization.

agreement what next? 

A. The offer is presented to the homeowner as in any other transaction. The price and terms are to be

fully negotiated by buyer and seller before being submitted to the short sale lender.

Q. Once I come to an agreement with the seller is it pretty much a done deal? 

A. Even after you come to agreement with the seller, the seller’s lender (or lenders, if there is more than

one mortgage) must approve the sale before you can close. In some cases the lender will offer a

conditional approval, meaning either buyer or seller would have to modify the offer and terms in order to

offset loss. While neither buyer nor seller are obligated to agree to modifications the lender’s approval

may be linked to agreement to acquiesce to their demands.

Q. Can the seller entertain and/or accept other offers after mine has been accepted? 

A. In most Short Sale transactions a Short Sale Addendum is typically incorporated into the Purchase

Agreement; the addendum sets forth the agreement between buyer and seller as it relates to

subsequent offers. Review all contractual agreements and forms with your Realtor® before signing.

Q. How long does it take from start to finish? 

A. Some say when there is only one mortgage; the approval can take two months or more. That may

be overly optimistic. If there is more than one mortgage with different lenders, it can take four months

or longer for the lenders to approve the sale. Remember patience is a virtue in a short sale!

Q. What if I have a home to sell or want other concessions? 

A. If you have a home to sell before you can close on the purchase of the Short Sale, or if you need to

be in your new home by a certain time, a Short Sale may not be for you. Lenders tend to prefer offers

with few contingencies and flexible terms. Inspection contingency time periods should be shorter rather

than longer. Remember, making financial demands on the seller such as pest control repairs, or credits

for property shortcomings all translate to additional costs to the lender who is absorbing the loss.

purchase? 

A. It’s a good idea to review a property profile (tax assessor’s records) with your Realtor® before

writing the offer to purchase. By doing so you will gain a clearer understanding of the number and

amount of all loans currently attached to the property. Keep in mind you will not be able to determine

other debt owed by the seller that is unattached to the property.

Q. Once the lender approves the Short Sale is the Seller obligated to the sale? 

A. That depends on whether or not the lender granted unconditional approval. If a lender approves the

short sale but imposes conditions regarding cash contributions or continuing liability for the note, the

seller may refuse to proceed with the short sale.

Q. Will I be able to negotiate credits and/or repairs on a Short Sale? 

A. While every transaction is unique, and you can certainly try, it isn’t too likely. Lenders are absorbing

significant losses as well as clearing other debt and costs of sale. They may not be inclined to agree to

requests for repairs or credits.

Q. Any other tips for a Buyer in a Short Sale? 

A. Talk to your lender regarding interest rate locks. Interest rates are fluid and may fluctuate while you

are waiting for approval. While we are seeing more stability in most regions, there is always the

possibility that property values could decline. Due to the extended time period required for the majority

of short sale approvals this is a factor to consider.

While there are risks associated with a short sale, if you have the time, patience, and perseverance to

see it through, it can be a win-win for you and the sellers.