I was interviewed recently by news radio 101.1 FM KXL about short sales. Because the interview was short I was able to focus on the most important aspects of a short sale for both a buyer and a seller.
Here are the highlights from my interview:
Q. What do buyers need to know about short sales?
A. Have patience. Short sale means the bank is taking a loss and they can take 2-6 months to approve or counter a short sale. Once approved the bank will want to close in 30 days. You typically don’t deposit earnest money or start inspections until after the bank approves the sales price and terms.
Q. How do you handle repairs in a short sale?
A. Typically there are no repairs. Some times on major issues a bank will adjust a price or accept a credit but don’t count on it.
Q. What about sellers. What do they need to know?
A. You need to have a real hardship. Make sure that the short sale is being accepted by the bank for all amounts owed and that they are waiving the right to seek a deficiency. If the bank doesn’t waive the right to seek a deficiency they could come back in the future to collect some of the money owed.
Q. Any other important factors for sellers?
A. Just because you have an offer does not mean that a pending foreclosure will be delayed. You need to make sure you get something in writing from the bank that they are stopping foreclosure proceedings so you have time to work through the shortsale.
Q. What about the hit on a sellers credit score?
A. I’ve been staying in touch with our clients after the short sale is closed and they’ve been very happy to report that the credit score drop was less than expected. These sellers reported that the score dropped when they weren’t able to pay their mortgages but once the short sale was closed and reported on their credit score it actually went back up!
Every state and every personal situation can vary so talk with your attorney and tax professional before you decide to do a short sale.