Whenever the value of property goes down and the buyer cannot make the mortgage, the lenders may take less than the amount owed and this is of course is what constitutes the short sale.
Buying a house on a short sale seems to appeal to many people but most of the time it is not the best buy. Real estate people are unlikely to tell you buying a short home is not a good deal because it’s another source of profit to them. Realize that the real estate agent makes money but neither the seller or buyer does as a general rule. Despite this many real estate agents do not like short sales. They receive less money and take up a lot of time.
The seller paid too much for the house in the first place so the discounted price is no bargain. A few years houses were being bought and sold fast. One house in my area sold six times in one year and each time the price the price went up. Why the lenders continued to give bigger loans on that piece of property or any others in the same situation is beyond comprehension because the house value could not have gone up that much that fast. At any rate the seller does not have equity in the house.
Because the house was bought and sold to fast the loans given exceeded the property value. It is unlawful but some lenders put pressure on the appraisers to raise the value of the property more than it should be. Then the system of doing comparisons to determine property is not always accurate. Actually they were comparing one overpriced house to another. A real estate agent might try and push an unqualified seller into trying for a short sale. There are many agents listing houses as short sales without ever getting approval from a bank.
Banks and lenders want as much as their money back as possible and want at least current market value for the house. Aside from appraisals they will want a CMA which is a Comparative Market Value and a BPO which is a Broker Price Opinion. Lenders want the highest price they can get and will only accept the short sale when it is worth the price of the property. When foreclosures are more advantages to the lender they will foreclose. Lenders pay the closing costs on a short sale so they sell the house as is. The buyer has to pay for any inspections and then make up their mind if they still want to buy the house. It would pay the buyer to do some inspections. Even a handyman or a sharp relative can find out some things about the roof, plumbing, ext…
It often takes a long time to get a reply from the lender concerning an offer and a long time to close. If it’s discovered there are two lenders both have to be appeased or one can stop the sale.
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