Portland, OR - An increasingly common term heard out there in residential real estate and now even into investment real estate markets is “short sale”. It has the aura and status of being an end all of the housing problems, if you believe the hype.
In reality, all a short sale means is that the lender takes a haircut or a loss on the loan made to the borrower. The equity (if there was any to start) that the owner has is gone, and the property has been sold to a buyer that is independent of the former owner. The borrower walks away with no money, but his or her credit report is somewhat intact and the former owner can continue on with life. The bank then has the loan off their books and they can move onto the next problem loan.
A short sale is a complex process. You need to understand that you, as the owner of the house that the short sale is being executed on, no longer have the ability to decide on an offer when it is presented by a potential buyer. The bank or financial institution is now the third party that decides whether an offer is accepted or not. This is a key knowledge point and sometimes it is a hard reality the owner must face.
From an agent’s standpoint that has the short sale listing, there are many small, complex steps that make up a short sale. They are too numerous to mention here, but suffice it to say a majority of the agent’s time is spent coordinating all the competing interests involved in the deal.
The upside is that you may be able to avoid a foreclosure on your credit rating and all the associated fallout that goes with that scenario. A short sale is a second chance, and worth considering if you have hit difficult financial straights.
A short sale is not a panacea for all troubles and there is NO guarantee that one can even be executed in all cases. A wise decision is to seek legal counsel and then the services of a short sale real estate specialist who is adept at negotiating with banks. Remember, this is only one avenue to remedy financial difficulties and should be approached with your eyes open to the reality of your situation.
As an investor, this is an area worth considering if you want an entry into an area for a bargain price. Understand though that the sales are usually as-is and you as the buyer assume the risks. Also, there is a great deal of competition for these houses with groups of insider investors pooling money and resources to buy them up. Still, there are some outstanding bargains out there and a knowledgeable real estate agent can find them for you. We are seeing more commercial distress properties out there as well, but so far nothing rivals the numbers of residential properties available as distress sales.