This week we got a question from Tim. He writes:
My son and his family are relocating back to Oakland County after 4 years in the military. Their financial situation is fairly strong. They have a serious interest in a house listed as a short sale. The listed price for the home is about half the price of other listings in the neighborhood. The house is only 3 years old but has not been well maintained and needs some work. The question: How long can a home linger in a short sale status before it moves to the Sheriff’s Sale and ultimately foreclosure? It seems like a short sale is kind of in a twilight zone….neither here nor there. The home is currently occupied by the homeowners.
Tim, I wish there was a quick and easy answer to this question, but there isn’t. First of all, the lender is under no obligation to begin the foreclosure process. They could, quite literally, wait years without a payment before they begin the foreclosure process and proceed to having a sheriff’s sale. After the sheriff’s sale the homeowner usually has 6 months to redeem the house, or sell it in a short sale, before the bank will take the house back and have them evicted if they are still living there.
I sincerely hope your son has a buyer’s agent, preferably one experienced with short sales. They need to be asking the seller where they are in the process and to see some evidence of this. Public records should give some indication if the sheriff’s sale has taken place. Find out if there is a bankruptcy involved or a pending divorce.
The other bugger about short sales is that the listed asking price means NOTHING most of the time. Banks won’t talk to sellers about a short sale until they have an offer. The Realtor’s job is to generate an offer. The bank can, after months of waiting for a response, counter at a much higher price than the seller and the purchaser have agreed upon.
The other thing to remember is that while this short sale is being processed by the bank, the current owners will probably continue to neglect it, as they already know they are losing it.
There are many, many potential pitfalls in buying a short sale. My personal advice to most purchasers is to find a motivated seller who can sell without involving the bank, and don’t even look at the short sales. SHORT sale is a misnomer. There is nothing short about it for the buyer. And there is no easy road map.
I wish your son the best of luck and I thank him for his service to our country.
photo by Kevin Dooley
Written by Maureen Francis
SKBK Sotheby's International Realty, 248.430.4450
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Susan 10.14.08 at 5:35 pm
I wish it was more easy to find homes that do not need to sold via a short sale. It seems like with certain price ranges, all that pulls up are REOs or Short Sales. I’m guessing the higher priced homes are probably not suffering as much.
Maureen Francis 10.14.08 at 5:41 pm
Susan,
Homes in every segment are suffering. Our MLS has recently changed it’s rules to so that we can search for listings that are not REO’s or short sales. It will take a while for all of the listings to get properly coded, but it is a positive change.
Thanks for your comment.
Tim 10.21.08 at 7:03 pm
Maureen,
Based on your experience, what is the best source of information to signal which properties are in default and have been formally, legally, filed to start foreclosure proceedings. There are lots of web sites that are “hustling” for subscribers, but, being skeptical by nature, I don’t trust “hustlers”. The information must be in the public domain, but where is the best access point?
Thanks, Tim…..again!
Maureen Francis 10.22.08 at 9:09 am
The local county legal news is probably one of the most reliable sources. I think you have to subscribe to it to access the information, though that will probably cost you under $50 per year.