There are numerous things to be confused about with short sales, but one thing right on top is the price the buyer sees advertised on the internet. In a regular sale, you can pretty much count on having to pay somewhere close/within a small percentage of that listed price. With a short sale, that initial list price may be just a guess on the part of the listing agent. Here is what can happen with the price of a short sale:
- Agent lists home for sale at $300,000 which is slightly below market value. The seller owes $400,000 on the home.
- After several weeks of no offers, the agent is forced to reduce the price to attract an offer to get the short sale process going and stave off the foreclosure. The price is now $265,000.
- The agent gets an offer for $250,000, submits it to the bank, and then months go by before a negotiator with the bank is assigned to the file.
- The bank gets an appraisal done that comes in at $270,000.
- It is discovered that there is a lien on the home for $15,000 for back HOA dues. The seller stopped paying the HOA for the last several months during the short sale process, and a law firm gets involved and puts a lien on the home.
- The lien of $15,000 needs to be paid off, and the bank will only agree to a purchase price of $260,000. So the buyer needs to come up to $275,000.
- The buyer with the offer of $250,000 refuses to pay that amount for the home, and so the home goes back on the market at a new list price of $275,000, the amount the bank and all other parties agree to.
- The price of $275,000 on an approved short sale for a home worth just over $300,000 attracts several buyers, and a new buyer is chosen and escrow is opened. It could even be the case that a new buyer offers $280,000 to beat out other buyers.
This scenario is not the case with every short sale, but it happens a lot of the time. The buyer should bear in mind that there are several factors that come into play with the final sales price of a short sale property. The bottom line price comes down to what the buyer is willing to pay and what the seller (the bank in this case) and all other parties involved are willing to agree to. If no buyer will pay the bank’s price, then it will go to foreclosure. I have seen it happen that the short sale price agreed to is lower than what the home sells for as a bank-owned property and vice versa.
Have more questions? Feel free to call or email me 949.525.5905.