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.