The phrase “short sale” has made its way into the every day language of home buying. I talk to people every week who are looking for a home and want me to send them a list of short sales. When I ask them why they want short sales they usually respond with something to the effect of “That is where the best deals are.” There can be some good deals in short sales, but are short sales really the best option or best deals for buyers?
If you are a seller a short sale may be your only option, but if you are a buyer a short sale should often be your last option. Contrary to popular belief, a short-sale is not often going to be the best buy for a home shopper. In a rare case where a home may be going to foreclosure in just a couple of weeks and a buyer can come in and make a purchase in cash and close in just a couple weeks, then there may be a good deal, if you can get them accepted. But for most buyers this is not the situation.
More often than not the better deal is going to be in the bank owned foreclosure property. These properties are often selling for 10% to 15% below conventional sales and banks are looking to work with buyers to get rid of them. One of the big differences with short sales vs. a foreclosure property is the time and patience it will take. If you want or need to be in a home in the next three months forget about even stepping inside a short sale listing. It is very common for it to take as much as 10 to 12 weeks just to hear from a bank if they will accept an offer or not. If there is counter or conditions set it could add as much as another four to eight weeks on top of that if negotiations are needed. We currently have one offer on our team that a buyer made on short sale listing which we presented to bank the first week of December and we are still waiting for an answer ten weeks later. No matter how many times we call, we still wait.
During those months that you wait for an answer hundreds of foreclosure properties could come on the market that are better deals than the one you are waiting for. During that time you are off the market completely because if the bank does accept the short sale it is a binding contract you signed. If you were to work on a bank owned foreclosure property over a short sale you are most likely to get an answer from a bank in under a week. If that deal does not go through then there are hundreds of other properties to choose from and you did not waste three to four months waiting to hear an answer.
Another problem that short sales present to buyers is the amount that actually get to closing. Less than 20% of all short sales actually get accepted and go to closing. If you were to put an offer in for a short sale you are taking yourself off the market for up to three months with only a 20% chance at best the deal will get done in the end.