There are a lot of houses, town houses and condos in the MD Suburbs of DC that are “short sales” and require “third party approval”.  What’s that all about?

A Definition

A “short sale” is a property owned by a Seller who can no longer afford their mortgage payments and wants to sell their home.

Unfortunately, the Seller cannot sell their home for enough money to pay off their mortgage and the related costs of the sale (i.e, transfer and recordation fees due to the State and County, lien release fees, settlement costs and, of course, the fee for the Realtor). In other words, they are “short”.  Another way of saying this is that they are “upside down” in their house.  They owe more than it’s worth.

“Third Party Approval”

The “third party” in all these cases are the banks or mortgage companies that will have to take a loss when the house sells.  Sometimes the loss is substantial.  Sometimes the Seller is just trying to get out of a tight situation and could really afford to keep up the mortgage payments but just doesn’t want to, for any number of reasons.

Because these banks and mortgage companies are going to take a big hit on the sale of the house, they need to be involved and approve any offer.  This means they review the terms of the offer and they are also reviewing the financial status of the Seller to make sure he or she is not “gaming” the system.

Since there are so many of these “short sales” in the MD Suburbs of DC, the banks and mortgage companies are overwhelmed.  Add to that the fact that the people processing the files are strictly 9 to 5 employees who couldn’t care less if you got an approval today, tomorrow or sometime next month.  They’re just plowing through the files, one by one, and trying to work the best deal for the bank.

The bottom line is that the bank or mortgage company has to approve the offer or there will be no sale – no transfer of real estate from a Seller to a Buyer.  Nada. Nothing.  Goose egg.

So How Long Does This Take?

Since there is such a huge backlog of homes that are being processed as short sales and as foreclosures it is not uncommon for the bank to take anywhere from four to six months just to respond. Even after they respond they still need to scrutinize the Buyer to make sure the Buyer is qualified to purchase the home and the title company will still need to do a title search to make sure there are no other liens against the property like a tax lien or unpaid water bill.

So it can take quite a long time – 6 months or more – from the time a Buyer places the initial offer on a home and the time they go to settlement and take possession of the home and can move in.

Oh yeah.  They’re all “as is”, too.  No repairs. Nothing.  What you see is what you get.  And that changes as the months go by.