Short sales now make up 20% of the homes for sale in the Twin Cities, an increase in recent months because short sale inventory remains near all-time highs and the number of “traditional seller” homes are the market has begun its seasonal decrease. This means that no matter where you are searching and what you are searching for, you are very likely to come across several homes for sale that are short sales. So the question is: should you buy a short sale home?
I have discussed short sales many times (1, 2, 3, 4, 5, 6, 7) and we’ve all heard by now that a short sale offer can take 2-6 months to be accepted, rejected or countered by the seller’s bank(s). For many buyers, the unsure and lengthy nature of short sales makes them unacceptable options. Some buyers think that it won’t be that bad, only to go nuts with the waiting game where there is often little or no apparent movement in the process. Still, for some people a short sale may be a good option to consider – so long as you have the time to play the waiting game and understand that even after waiting you may not get the home.
Star Tribune reporter Maria Elena Baca wrote a story about her own experience buying a short sale. It is a pretty good overview of what typically happens in a short sale except this one moved a little quicker than the average sale – just about 90 days from offer to closing.
What I find particular of note in this story was that the highest offer was not the one the seller accepted – the reporter says she believes her offer was accepted over a higher one because “…it helped that we were a family, and that we had the flexibility of living with my parents, if we must.” In short sales, typically only one offer is accepted by the seller and forwarded to the seller’s banks for approval and the seller (not the bank) chooses which offer they accept and submit.
This is one of the biggest reasons that banks lose more money on short sales than they need to: if they were quick to respond to offers, as they are with their bank owned (REO) homes, more buyers would make offers and the accepted offer would likely be the best price, since there wouldn’t be nearly the concern of a buyer becoming impatient and walking away like there is today.
