May. 5, 2009 - A short sale is not really for sale

On Rain City Guide, some time ago I wrote a post called Should You Buy a Short Sale Property?  That post was written for a client of mine who was already in the escrow process on a short sale.  It covers a lot of ground, but recently I am seeing more confusion by people making offers on short sale properties, than those in escrow on short sale properties.

This morning I followed a link on Twitter purporting to be a mini-tutorial on distressed property sales from short sales to foreclosures to REO Property.  It said this about short sales:

"A short sale is a property... that is put up for sale with the lender's permission..."

That is so not true.  The lender in most cases has NOT given permission, and does not interact with the short sale process until there is an offer on the property.

This is causing a lot of confusion, especially when the lienholder approval number is higher than the asking price.  The best analogy I can give is if a wife put a house up for sale without asking her husband.  Then when she has an offer, she goes to the husband for him to agree with the price she put the property on for.  He might refuse to sell it period, he might agree and sign the offer, he might hold out for more money than the asking price.  Such is a short sale. 

The person with the ultimate authority to approve the offer, is NOT consulted prior to the property going on market, in most cases.  So a short sale is not REALLY "for sale"...it's "maybe" for sale.  The lienholder may decide to reject ALL offers and take the property instead.

I'll try to write a post in more detail on Rain City Guide when I have a chance.  In the meantime, knowing a short sale is not necesarily "for sale" may help some people who are currently making offers on short sale properties.

May. 7, 2009 - RE: A short sale is not really for sale

One detail, small it is I admit. The owner of the house probably doesn't need permission of the lender to sell.  (probably).  Of course they still owe the same amount to the lender no matter what the sales price, be it over or under the loan balance.  This enforces the idea that someone selling a house should be aware of the total amount of liens on the house, etc.  This is certainly not legal advice. And a trustee will not reconvey a deed of trust without instructions to do so from the beneficiary. A good example of how a good realtor is a necessity.

May. 7, 2009 - RE: A short sale is not really for sale

Fred,

1) Everyone would LOVE to have the lienholder(s) permission in advance of listing the property.  BUT, most will not talk to anyone until there is an offer on the table.  So no, they usually do not have lienholder "permission" to list, unless a previous offer was presented and failed. Rarely do they give any guidance as to list price, so the counter on a previous offer is the best one may have to work with.

2) There is no Trustee reconveyance for a Short Sale. That's only for a Foreclosure.  A short sale goes through the normal escrow process, as does a bank owned sale, with higher level of Deed conveyance than a Trustee Deed.

Your last sentence reads like a NAR commercial.  Suggest you avoid that type of rhetoric.