Wednesday, June 25, 2008

Lenders Prefer to Foreclose on Short Sales

The title of this post might sound crazy to you, but the more I get involved with short sales and bank owned homes, the more I realize that lenders go out of their way to make sure the short sale gets foreclosed upon.

Lets take a step back and look at all the reasons why a Realtor and a buyer would rather not deal with a short sale:
1. Really low price - it's obvious the sellers is desperate and once the bank does an appraisal of the home, their going to reject the deal.
2. Risks involved:
A. You pay for home inspection and appraisal not knowing if the home is yours.
B. Your initial deposit can be at risk if the seller disappears or won't release your money.
C. The lender forecloses on the home while you are still in negotiation.
D. The seller files for bankruptcy.
3. It can take an average of 2-5 months to find out if your offer has been accepted by all lenders.
4. You might miss out on new bank owned homes because your initial deposit it tied up on a short sale.

Because lenders know bank owned homes are in high demand and are selling for top dollar, Realtors and buyers prefer to work with a bank who can make decisions within a few days. Another words, buy a short sale not knowing whats going to happen with risk, or buying a bank owned home knowing the outcome within a few days.

It's obvious why lenders prefer to foreclose on a home than sell it short. Agents prefer it and so do buyers. The only reason anybody should think about buying a short sale is if they have time to waste and some money to risk. Also, be sure you are working with a short sale specialist.

Written by:
Richard Johnston, RE/MAX

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