Short Sales: Buyer’s Bonanza or Boondoggle? by Real Estate Estate Attorney Peter N. Brewer ~ Part 1 of 3
by Peter N. Brewer, Esq., The Law Office of Peter N. Brewer Short sales are commanding a lot of attention these days, but from the Buyer’s perspective are they a bargain, or a bust? This article discusses a few things a buyer may want to consider before making a short sale offer.
Let’s start with the basics. What is a short sale? A short sale is one where the price being paid by the buyer is not enough to pay off the seller’s mortgages, hence the purchase price is a little “short.”
A short sale is a little more complicated than a traditional sale because agreement must be reached not just among the buyer, seller, and buyer’s lender, but must also include the agreement of the seller’s lender, who is taking a loss. Without the agreement of all of these parties the sale cannot occur. The seller’s lender must agree to accept a loss by getting less than full repayment of its loan to the seller. It must accept a “discounted payoff.”
Timing of a Short Sale
Short sales take longer because an application must be made to the Seller’s lender to accept the discounted payoff. The banks these days are taking their sweet time to investigate and approve, or not, the short sales. Typically the seller’s lender will want an appraisal, as well as financial information from the seller, in order to verify how much “under water” (over encumbered) the property is. The short sale approval process can easily be sixty days or longer, sometimes much longer, often four to six months. Meanwhile the buyer is typically unilaterally committed to the purchase – meaning the buyer typically cannot withdraw if, for example, the buyer finds a property the buyer likes better.
Because of this only a buyer who can afford to be patient should consider a short sale purchase. If a buyer must secure a new residence within a prescribed time, a short sale is not appropriate.
You can contact The Law Office of Peter N. Brewer at 350 Cambridge Avenue, Suite 200, Palo Alto, California 94306, phone: (650) 327-2900 , or on the Web at www.BrewerFirm.com.
Peter N. Brewer, Esq., is a California real estate attorney with thirty years’ experience, and is the owner and managing partner of The Law Office of Peter N. Brewer, in Palo Alto, California. The firm serves the legal needs of homeowners, real estate and mortgage brokers, agents, brokerages, title companies, developers, investors, and other real estate professionals and their clients.