Buying A Palm Springs Area Short Sale Property

With the increase in foreclosures lately, you may have heard the term 'short sale' and wondered what it was. A short sale is when the lender (bank or mortgage company) agrees to accept less than the full amount owed in order to pay off the mortgage.

Why would a lender willingly lose money? Usually, it's because the lender stands to lose less money in the long run under the provisions of a short sale compared to the time and expense involved if the property is foreclosed on.

Short Sale Property Listings

Palm Springs area homes and condos listed as short sales begin the sales process much like regular listings.  A realtor signs a listing agreement with the owner of the property and also includes a standard short sale addendum. The property is listed at a price agreed to by the owner, usually in-line with recent comps of like properties in like communities.

The short sale seller’s realtor will market and show the property until an offer is received. The owner can accept or reject potential offers just as with a non-short sale property. Once the owner accepts an offer, the offer and a large amount of paperwork are submitted to his/her lender(s). At this point it is up to the lender to approve, reject, or make a counter offer on the property. The lender will ultimately set the final selling price.

When short sales work well, all parties stand to gain. But there are several potential drawbacks. The bank or mortgage holder must agree to the terms and conditions of each short sale. Short sale offers can often take months to be reviewed and/or approved because lenders are often backed up with paperwork.

Patience Required For Short Sale Buyers

A buyer submitting an offer for a short sale property should, in most cases, be prepared to have patience throughout the process, including waiting to hear back from the lender on their offer. Many buyers become frustrated waiting for an extended period of time without receiving any feedback on their offer and, in turn, continue to look at other properties, and may ultimately choose something else. For patient buyers ready to 'wait it out' a short sale can present a great opportunity. Buyers not prepared to wait to hear from the lender regarding the status of their short sale offer might want to consider a bank owned foreclosure or non-distressed property instead.

As with any purchase offer, short sale buyers will need to submit proof of funds (bank statement) if paying cash, or a pre-approval letter from their lender if financing a short sale purchase at the time the offer is submitted.

Choose Your Guide Wisely

Sheri Dettman & Associates has succeeded in completing a high percentage of short sale transactions for both buyers and sellers. “Short sales are difficult if the listing agent of a short sale property doesn’t have a lot of experience in completing short sale transactions,” Sheri said. “Before placing an offer on a short sale property for one of our clients, we will research the past success rate of each short sale listing agent and also speak with them regarding their experience with the short sale process and their communications with the lender.”

Note: You may notice “Contingent Other” labels on some MLS listings. In most cases these properties are short sale listings where the homeowner has accepted a potential buyers offer. The property then remains classified as contingent other until the bank or lender agrees to terms with the buyer. Some short sale properties are put back on the market when buyers decided not to ‘wait it out.’

If you have questions regarding short sales, please don’t hesitate to contact Sheri.

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