In the current housing environment, there  are lots of home buyers, especially first-time home buyers, that are looking for bargains.  They’ve been told by the media that foreclosures are at record highs and that house prices have fallen to pre-boom levels.  What the media doesn’t tell us is that, in addition to all the foreclosures, there are lots and lots of  “short” sales.  These homes have not been fully foreclosed upon and the bank does not fully own them.  The home seller can sometimes get back on track, pay their mortgage up-to-date, and keep their home.  Other times mortgage companies will work through a loan modification that will help the home owner stay in their home.

Both instances are rare. Generally speaking, when a home owner realizes they cannot keep up with their mortgage payment they know it is just a matter of time before the bank comes with the sheriff to evict them.  However, many home sellers try to sell their home prior to foreclosure in order to prolong the foreclosure process.  Sometimes home owners think that selling their home before their home is fully foreclosed upon will help with their credit score.

Why Banks Take So Long Approving Short Sales

The bottom line is this: the home owner cannot sell their home for anywhere near what they owe for the mortgage.  They are “short”. That’s why it’s called a “short” sale.  In fact, “short” sales take a very long time because the bank must approve the sale. In order for the bank to give their blessing, they will:

• Determine if there is true hardship on the behalf of the home seller
• Determine the true market value of the home based on area sales of similar homes
• Determine the condition of the home
• Determine if applicable State and County laws are being followed as they relate to foreclosures
• Determine how long it might take to actually foreclose on the home
• Review any offer from any buyers and determine if the buyer has the financial ability for the purchase and if the price and other terms are in the best interest of the bank.

Multiply all those steps by the huge numbers of home sellers that are trying to sell their homes for some amount “short” of what they owe on their mortgage and you might have an idea of why it takes anywhere from six to eight to twelve months or more to get a bank to approve a “short” sale.

No Guarantee The Bank Will Approve The Short Sale

Many times, a bank will determine it is in their best interest to foreclose on a house. However, this takes time since there are various waiting periods and notification periods mandated by State and County laws and regulations.  So the property will sit until all the hoops have been jumped through, the auction has been completed and the bank can take possession and ownership of the house.

It’s also important to understand that both “short” sales and foreclosures are sold in total and complete “as is” condition. No repairs are going to be made by anyone.  If the roof leaks, that’s the way you get the house.  If there is fuzzy, black mold crawling up the walls and along the baseboards, that’s the way you get the house.  Cracked windows, gutted kitchens, debris in the basement or garage?  It’s yours.

So long story, short:

• The process takes a long time. (count on a minimum of 6 months)
• There are no guarantees that the bank will even approve a home buyers offer.
• The house comes exactly how you see it.

Check out the Market Trends for up to 10 zip codes in the MD Suburbs of DC by simply filling in the form over to the right or click here. You will get a totally FREE report e-mailed to you. No phone calls, no spam. I promise.