Short Sale Properties: Is Now the Time to Buy?

Miriam Hoffman has been looking in Los Angeles to buy her first house for over a year. She has put in offers on two "short sale" properties--in each case, waiting months and months for a reply--and neither offer has resulted in a purchase. A short sale is when the proceeds from a property's sale fall short of the balance on the property's loan. "There's a saying I heard a while ago, 'There's nothing short about a short sale,' " she says. "And it's very true." Hoffman is still looking for her first home.

Hoffman's agent, Coldwell Banker Realtor Victoria Massengale, thinks short sales would go much smoother, "if selling agents got their acts together. Then these short sales would happen faster and more efficiently."

But how can you maximize your chances to get a home purchased by short sale--and avoid waiting six months to a year for the banks to sort through your application? The answer can be found in two words: preparation and patience.Since banks want to recoup as much money as possible and people want to unload properties, short sales seem a good way to proceed. But the process is rarely as easy as one might hope.

First of all, to have a short sale, certain criteria must be met. RE/MAX Realtor Tony Yollin explains: "You have to be in a hardship, for example, to sell [a house] as a short sale. So if the agent wants to list it as a short sale, but they've made all the payments, they can't. And then you have wasted time. It's important the selling agent knows what they are doing."

So what can you do do to maximize your chances to get a great deal and not have to wait a long time? First, second and last: prepare. Learn about short sales, and make sure your Realtor--if you are a seller or buyer--knows how to do short sales. Many large real estate chains make all agents take classes in short sales. And many independent Realtors also prepare; it's not only the chains that know about short sales. Make sure your particular agent has experience with them, and ask how many they have done. There are a lot of steps in short sales and missing even one can set the process back months. You want to ensure the agent will do everything to keep the deal flowing.

While Realtors need to have their ducks in a row, short sales also can stall with banks who notoriously have files sitting on desks for months awaiting review. And this is where, even in good conditions, patience is key. "Unfortunately, for the people at the bank, it's another file on their desk," says Massengale. "They are short-staffed and things get lost and misplaced. They have so many of them and they have so few people."

To help with this process, Bank of America has recently implemented a computer program to put through offers, which Yollin thinks is great, "because you know it exists somewhere," he says. "Most of the time with the process, you feel you are faxing things into a void. But I still tell clients the process can take up to six months."

Yollin also cautions about short sales for another reason. "Lenders aren't necessarily great multi-taskers and they don't take the best offer, they take the first offer," he says. "So you want to have your offer in first. I was just in a short sale and they sold it to a worse offer than mine. They negotiate the next offer in the pile."

According to Gary Kishner, a spokesperson for Chase in Northridge, Calif., "Each story would have to be examined for their situation but the short-sale process is just that, a process." He advises people to look at Chase's website to find information about short sales (something many banks have).

While short sales can be a good way to buy a home, it may not necessarily be the best way. "People think it's quick and a deal and they are getting something below market value, but things sell for what they are worth," reminds Massengale. "You are getting market value."

Yollin advises to keep focused on your end goal. "You want to buy a house, not a short sale."
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