Not since the post-1987 stock market, have so many sellers been ?upside down? on their mortgages. Unlike this early 1990?s real estate market, when sellers commonly would bring money to closing to make up the difference, banks are now commonly willing to forgo part of what is owed to them to get the liability off their books.
Short Sales Can Mean Delays and Stress
There are many more people in trouble now (and typically short a lot more money than in the early 90?s) than any other time in the past. Getting a great deal through a short sale is a popular idea. However, this type of sale does not come without some challenges for both the buyer and seller. As they say, no pain, no gain.
One example of short sale drama is Joe Nichol. After accepting a new job in Chicago and moving from L.A., Joe decided to buy his first condo in The Fordham building at 25 E. Superior. After a long negotiation, Joe was excited to move in to his first place in time to start his new job downtown. However, a few days into the attorney?s approval, Joe got a call from his attorney. Turns out, the seller of the condo could not pay off his existing loans to sell the property. This is where the stress began for all involved.
A Real Short Sale Story…of Waiting and Stress
For the next 3 1/2 months, Joe was not sure if and when he could close on the condo. He had to rent a temporary apartment and put his things in storage. The biggest part was the lack of communication from the seller?s mortgage holder. It took almost 3 months just to be assigned a ?negotiator.? After this, the bank needed detailed financial information from the seller, confirming that he did not have any assets to make good on the loan. The fact that the seller had not paid his mortgage in 2 months helped the bank move things along a little more quickly.
Joe closed on his condo, after enduring almost 4 months of stress and frustration. The day of the closing, the bank almost cancelled the deal because of some numbers that they thought were being changed on the RESPA. Banks are always looking out for sellers who are trying to profit somehow from a short sale. Luckily, Joe?s attorney and the seller?s attorney smoothed everything out with the bank and the sale closed.
A Not-So-Bad Short Sale Story
Another short sale that was recently sold with minimal drama was a multi-unit building in Lakeview. In this case, everyone knew it was a short sale up-front. Like many short sales, this building had multiple offers, ten to be exact. Some offers were very low and some very solid. This building had two mortgages. Luckily, the second mortgage agreed to take virtually nothing of what it was owed and the first mortgage took about a 10% hit. This deal closed in 4 months and went very smoothly.
Short sales can be easy or very difficult. You can have delay after delay and many surprises. If everyone knows what they are getting into, it helps to keep confusion and drama out of the picture. In this market, make sure you know if you are buying from someone that is even close to being ?short,? especially if you need to close by a specific date (as most of us do!).
We’d like to thank KamalSell for so generously sharing today’s photo via the Creative Commons License.Email This Post To a Friend.