If you are seeking to buy a home, youve probably already been told by multiple people to stay away from short-sales. Of the many little reasons you may have been told this, here are the main issues: bank approval is required on top of seller approval for all terms, theres no such thing as a short short-sale, most of the professionals are inexperienced, and there is a decent chance the deal wont get approved.
1. Bank approval is required: often times, the seller doesnt care at this point ” it is hard enough to get them to do what is needed for the short-sale, but then you need to get bank approval. Every aspect of the deal must be approved by the bank. The seller is the gatekeeper and the bank is the decision-maker, however they are not working together.
2. Short-sales take a long time: short-sales take anywhere from 2-6 months to get an approval and then you have to make it through escrow. Very few home shoppers actually have the luxury of waiting 6 months to find out if their offer will be accepted. Many buyers enter into a short-sale hopeful that their deal will be different and one of the quick ones. After a few months go by and they see something else they like just as much, they will not hesitate to make an offer on another property and move on.
3. Banks are ill-prepared: very few banks prepared for the onslaught of short-sales that have been sent their way. If they saw it coming, they probably wouldnt have written bad loans They are testing out new systems, hiring & training new personnel and sorely understaffed in many cases. When you submit a perfect short-sale package with an offer, you still have a line to wait in for months in some cases before they work on your file.
4. The bank may not approve your offer: at least of all short-sales submitted do not get approved and the home is foreclosed on. This can be for a myriad of reasons. The bank may think that the home is worth more than the offer price. Maybe the short-sale negotiator or realtor handling the short-sale is horribly unorganized and unable to work with the bank, who may be just as unorganized. Whatever the case may be in each instance, there is the uncertainty that you could be waiting all this time and not getting the home at all. For this reason, some buyers move on to a sellable property prior to obtaining an answer from the bank.
All in all, it is obvious why the short-sales are something to be weary of. With a lot of inexperienced people on all sides of the transaction, it takes a long time to get an answer and sometimes even that doesnt happen. The system is broken, but without the money and manpower to fix it, Im quite sure well be struggling through these for at least another year before the banks get their act together.
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