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Should I avoid short sales when looking for a home?

This is a question that comes up frequently when meeting with potential buyer clients, and I’ve got mixed feelings about how to respond. To be sure, Short Sales offer an opportunity for buyers to pick up properties for less than market value. In my last post, I shared a statistic that was offered to me about a nationwide average of 70-88% of fair market value for Short Sales. To put that into real numbers, let’s say you have two identical homes with a market value of $100,000. In this scenario, the Short Sale home (on average) would sell for $70,000 – $88,000 vs. the $100,000. A pretty good deal!

However, statistics are macro level, real estate is sold at the micro level. By this, I mean that each market is different, and the numbers should be taken with a grain of salt.  But, what if we could get every Short Sale for less than market value? Should I recommend them to my buyers?

I’ve done many Short Sale transactions, both as a Buyer’s agent (representing the buyer) and as a Listing Agent (representing the seller), and I will declare that they are not for the faint of heart! From a Buyer’s standpoint, there is little difference between a Short Sale and a Fair Market sale in terms of process. However, the main difference is TIME! While a typical sale might close in 45-60 days from the date of mutual acceptance, a Short Sale could take as long as 6 months to close, and even then there is no guarantee!

So, the big question that I ask my buyers is “how long are you willing to wait for a ‘potential’ deal on a property?”

I recently had a buyer write an offer on a Short Sale property. This particular property had been in contract twice before but had fallen through while in escrow. We were told by the Listing Agent and his Short Sale Negotiator that this time would be a breeze. They lied! Four months of waiting and with no end in sight, my buyers became so frustrated at the lack of response by the Listing Agent and his “team” of negotiators, that they rescinded their offer and purchased another property.

As a buyer, I would urge you to consider the following before deciding to pursue a Short Sale property:

  1. Do you have a deadline (date) in which you need to be settled in your new home? If the answer is YES and it is less than 3 months, then I wouldn’t suggest a Short Sale property.
  2. Do you have a low tolerance for frustration? If the answer is YES, then I wouldn’t pursue the Short Sale property.
  3. Are you impatient? If so, then move on…

From an Buyers Agent standpoint, Short Sales are time-consuming and frustrating. There is no guarantee of a closing, and after 4-6 months of working with a buyer on a deal (only to have it fall through) it can be disappointing. Based on personal experience, I recommend only pursuing Short Sale properties if:

  1. The Listing Agent is experienced in handling Short Sales AND has processes in place to insure that the appropriate paperwork and communication between the bank and seller/agent is professionally handled.
  2. There is NO 3rd party negotiator involved. This is because these “professional” negotiators try and pass their fees onto you, the buyer. How unfair is this???

Still interested in Short Sales? Give me a call…

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