Short sales can be (and usually are) nightmares.

The asking price on a short sale is rarely ever related to what is owed. That's why it is 'short'. The property is still owned by the borrowers, but everything must be approved by the lender.

I'm not in RE, but a very good friend is, and a cousin is a mortgage broker, so I get my info from them Short sales can take 6 months or longer to close, maybe a couple of months just to get a signed contract. One sale in my friend's office had been under contract but not closed for almost a year.

Short sales are the worst possible thing for buyers. Unless it's a one-of-a-kind house, I'd keep looking.

And get a realtor with more experience in short sales if you want to proceed. The one you talked to doesn't sound like he/she knows enough.

I agree with sushipup. If your agent is actually confusing short sales with REOs, it is time to find a new agent.

Hi Kelton,

(Special tip; reconsider the initials... they are used to denote "bankruptcy" in the biz... ;~)

The realtor said it was a short sale, and I had to ask "what's that mean?".
So, she says that the bank is selling the house and claims that the price is based on what is owed on the house.

*IF* you are recalling and accurately re-stating what the Realtor® actually said, she is a dolt.

A) A shortsale is NOT sold by a bank, but by the owner who is in default. The bank retains effective right to kill the deal if the offer is too low by refusing to release their lien for that offer and then proceed to foreclosure & auction... but the bank cannot "own" the home until after foreclosure, and therefore cannot "SELL" the home,

B) A shortsale (properly negotiated) is typically struck at roughly the actual comparable-supported market price, or 80%-ish of the bank's lien note.

If the Realtor® you were talking to was the listing agent (or any affiliate of the listing agent) then they're further blowing smoke up your yoohoo.

As others have already explained, the short-sale process cannot be relied on to happen quickly. If you are shopping for your personal nest, you must decide if you are willing to sit out the 3-12 month chaotic and unpredictable negotiation process... most nest-shoppers have no such patience for the B.S. (In fact, very few profit-hungry greedy-bastahd INVESTORS have such patience!)

If you DO, you ought to be prepared for a 3-12 month reality, with a non-insignificant chance the whole thing could collapse and become unavailable out from under your offer at any time (even after you are 8 months & 3 weeks into it) because the seller dies, declares bankruptcy, or initiates (or defends) a lawsuit.

Luck!
Dave Donhoff
Leverage Planner
(Greedy-bastahd real estate investor, and professional shortsale negotiator)

Wow... thanks a million folks!

I'll ask some more, better informed, question now.

The realtor was unimpressive. She answered the phone (and my questions) as though she were entirely uninterested.

That said, maybe I did misquote her (good point Dave). I'll be sure to get the details.

Man, I didn't know short sales were so iffy.

Dave, do you think that 2010 is going to present better buying deals?

I'm looking at properties in my town's super-expensive neighborhood (looking at buying a super small house so it will be affordable but still waaaay overpriced for the size)

My city (Knoxville, Tn) does not seemed to have enjoyed the catastrophic price drops experienced by other places. I have this idea that there are people in the fancier neighborhoods that bought way over their heads and might be more interested in cutting their price in a few more months.

bk

My recent purchase was a short sale. It did take a while to hammer out all the details, maybe 4 months of waiting after 6 months of back and forth with the realtor over the price. The sellers bank at first approved my offer which I find out is $20,000 less than he owes on the house (this part took just over 3 months). When my bank had the place appraised it came in at $20,000 less than my offer so I balked and reduced my offer to the appraised value. His bank took 7 days to accept the new offer. This was all happening last year when property values were dropping every week. Even though a $40K drop sounds like a steal, this property would only be worth it if it had been maintained - it needs a lot of work and was never worth what he was asking. But all in all I am not complaining, I got the house I always wanted for a great price.

Hi Kelton,

2010 is just a few short months away... and we haven't even begun to see the market pressure that will come when the next round of foreclosures hit the markets now that the government hold-back is about to expire.

That said; Knoxville is definitely one of the fly-over markets that never crazily surged into a bubble, and therefor is also not crazily collapsing... and I wouldn't expect it to, even when the coasts are again swamped in fresh foreclosures.

Luck!
Dave Donhoff
Leverage Planner

Dave,

I'm hearing some talk of the next real-estate set back...so maybe I should hold off on a purchase.

It seems that every time I look for a house, there is always that one "oh my god, this kind of house rarely comes around!". When will I learn? Maybe I should wait until 2010 to see how things go. There will always be the cool-house deal.

So, if there is going to be downward pressure, would it be prudent to sell my house soon?

I have been told that my inexpensive home ($130g) is likely to sell fast with a ton of new home buyers looking for nice homes ... and rushing to beat the soon-to-arrive $8,000 incentive deadline.

A fast sell would be nice, but where does a person go when their house sells? The last time I was in this position, I just rented an apartment and paid the 2 month's extra rent penalty to break the lease. it seems the only way, right? (Probably need to start a new thread on these issues)

BK

Hi Kelton,
When selling in order to buy... you're basically switching canoes on the same tide. Trying to time it is futile, UNLESS you are willing to rent for a sufficently long time for the tide to actually turn (and even then you are gambling trying to "time the market" such that you're selling at the high of the tide and hoping for an immediate significant shift downwards.)

I'd advise not to be overly concerned about timing... especially in your neck of the woods (where real estate doesn't crazily surge up NOR down very quickly.)

Proceed cautiously... as a traditional realtor-assisted sell-then-buy process is going to nick you a solid 12-15% for all the transaction costs on both ends when all the dust settles... make sure its worth it.

Luck!
Dave Donhoff
Leverage Planner

I just put my house up on Zillow and Craigslist today.

We'll focus on selling by-owner, and not worry about buying so much. I like to keep things simple, and buying/selling at the same time doesn't feel terribly simple to me.

If it doesn't sell nice and easy, I'll just keep it longer. I don't need to sell, and I'm not in any kind of financial distress.

So, I won't be using a realtor and the 6% fee both ways. If I find a serious buyer, I might hire someone who simply knows how to make the sale all legal and legit.

On the For-sale-by-owner web sites, I see that they have a link which allows you to find people who can manage all that.