By Stacey McCarthy
Q: There is a home for sale on my block in Castor Gardens that says it’s a “short sale,” and my son would like to buy it. Does that mean it will be a fast settlement, and can my son offer less than the owner is asking?
A: Selling a home through a “short sale” means that the homeowner owes more on his mortgage loan than the price he is realistically able to sell it today. Either the homeowner is behind on his mortgage payments or is facing a hardship and is trying to avoid foreclosure by selling the home. A successful sale of this property would be “shorting” the mortgage lender what is owed on the mortgage. Despite the name “short sale,” it is normally not a short process. Short sales are typically negotiated between a struggling homeowner’s mortgage lender and a professional real estate agent. The homeowner will have little say in what price the lender will take. The agent must provide proof that it is impossible to sell the home for what is owed on the loan by showing comparable homes recently sold in Castor Gardens.
Once a lender agrees to accept less than is owed on the property, it can be sold. However, usually lenders will not approve a short sale unless there is a legitimate offer submitted, so it can be a very lengthy process. Lately, lenders have been overwhelmed with short sales and prove little experience negotiating home prices. It can take weeks, even months, to get a short sale approved by the lender so be prepared to wait.
If it is listed as a short sale, it usually represents a good buy. Short sales are generally priced on the low end. If your son is planning on making an offer considerably below asking, be prepared to be turned down at least once. After all, they will not be getting what they are actually owed. Also, don’t expect to negotiate repairs on the short sale since they are usually sold “as-is.”
It is very common for a lender to not respond quickly to an offer, even if it is close to the asking price. It is a smart tactic to make several attempts at the same short sale over the course of a few months if it remains unsold. Also, towards the end of the fiscal quarter lenders are more likely to accept a lower offer to clear their books for the quarter, so have your Realtor try again then.
Stacey McCarthy is a real estate agent with the McCarty Group of Keller Williams Real Esate. Her Real NEastate column will appear on NEastPhilly.com every Wednesday.