Are Short Sales the “Deal of the Century?”

April 8, 2010

Residential

Short Sales Do Not Mean Quick Sales

Short Sales Do Not Mean Quick Sales

Many people interested in purchasing in today’s real estate market are looking to cash on the “Deal of the Century.” Who can blame them when the national media is stating the property values have declined by 10% from last year to this year and still declining? Not only that, there is a record number of foreclosures and short sales saturating the market. There are many deals to be had out there but caveat emptor, meaning…buyer beware.

Not only should the buyer beware, the buyer needs to be more savvy in today’s market than ever. Many buyers are going after short sales thinking they will get a great deal quickly. These types of buyers could not be more mistaken. Let me take a quick moment to give you the short version on what a short sale is.

Short Sale Does Not Mean Quick Sale

A short sale means that the bank is going to come up short on what is owed to them. Let’s say that USA Bank gave a mortgage out on a property for $200,000. The mortgagor then took out a home equity line of credit to make certain repairs on the property. Next, the mortgagor lost their job and could no longer make either payment to the bank or the equity line of credit. Not only that, the property is no longer worth $200,000. The property owner is now in what is called a short sale situation. The property owner needs to obtain permission from the bank as well as the secondary lien holder to agree to accept less than the $200,000 that is owed on the property. Not only that, if they had work done on the property there may be mechanics liens on the property as well. All parties have to agree to take less in order for a short sale to be possible.

This is the reason why it takes so long to obtain a short sale approval. All parties need to agree and many do not want to accept less. With that said, short sales should really be called 6 to 9-month sales. Not only that, just because it is a short sale does not mean it is going to be a “deal.” The property will be listed at market value. Many listings that are not short sales are currently listed at market value with ready, willing and able sellers. In my opinion, this is where the “deal” is. Especially if time is of the essence.

We would like to thank Sirscooter for kindly sharing today?s photo via the Creative Commons License.
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About Katie Anderson

Katie Anderson is a respected and successful broker at Sudler Sotheby's Realty as well as a certified appraiser. She specializes in representing clients who purchase and sell condominiums, town homes, single-family homes and income property in the Chicago land area. In her small amount time in the real estate game (she became an agent in 2003) she has assisted in excess of 400 deals and over $200 million in sales and continues to use her skills as a certified appraiser. Katie resides in Chicago's Bucktown neighborhood with her loving husband and 4-year-old-daughter, where she spends much of her spare time with her family and friends. You can contact her at katie@thechicago77.com or at andersonbraack.com

View all posts by Katie Anderson

2 Responses to “Are Short Sales the “Deal of the Century?””

  1. Bill Fulton - Orlando Real Estate Says:

    What is the ratio between Short sales and foreclosed properties to conventional transactions in your area? Down here in Orlando those two categories made up 2/3 of the transactions. Bank owned properties are moving very quickly reminiscent of the “frothieness” that Greeenspan pointed out several years ago.

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