Since a lot of buyers we speak with express a desire to buy a short sale here in the Cleveland area, we wanted to write this article to share our experience about the process.
In the past few years, we have experienced the good, bad, and just plain ugly side of short sales. Before we talk about the pros and cons and our personal experience with Cleveland short sales, we should probably take a step back and explain a short sale.
While there are many definitions, Wikipedia defines a short sale as occuring when the sale of real estate falls short of the balance owed on the property’s loan. As an example, if a home owner can sell their home for $250,000, but they owe $300,000 on their loan, they would be short $50,000.
This situation poses a huge problem for the many Americans today who owe more on their loan than their home is worth. Basically, these sellers have very few options, none of which are ideal.
The first option is that the seller can bring the difference that is owed to the lender to the closing table to make up for the shortage. The second option is they can walk away from the home, let is go to foreclosure, and risk a deficiency judgement and having their credit destroyed. The last option is to negotiate a short sale with the lender. This entails getting the bank to accept less than is owed. In today’s market, more and more sellers are deciding that a short-sale is their best alternative.
So, this brings us back to our personal experience with actual short sales. We have been involved with them on both the buying side and listing side and have seen them take as little as 60 days to as long as 18 months. Overall, they can be extremely stressful.
There are some positive aspects to buying a short sale though. The main one is that you can get a great deal on a home. To be honest, after thinking about it, there really are no other positive aspects from our perspective. However, getting a great deal is pretty important to buyers, so this certainly holds a lot of weight.
As far as the negatives, where to start. The process of buying a short sale can be extremely frustrating. During the transaction that took us 18 months to close, the lender received an accepted offer in April, yet we didn’t close until November. I won’t bore you with the details, but let’s just say the buyer and seller had to jump through a lot of hurdles to get this deal done, and that’s putting it mildly.
The process takes an undefined amount of time, which makes planning difficult. The lenders for the most part simply don’t care how long the process takes. They are so backed up with files and so understaffed, that timliness just isn’t a concern.
The process is complex. Unfortunately, there is not a specific set of rules that all lenders must follow, so the process can vary depending on which lender holds the loan. I think this is the part that is most frustrating to buyers. They have no control over the lender and the communication is often sporadic as well. Most buyers usually get so annoyed at the process that they give up after a short period of time and decide to buy another home that isn’t a short sale.
If you are going to buy a short sale, I think it’s very important for you to have realistic expectations of the process. The time it will take to close is undefined, so you need to be flexible. You cannot speak directly to the bank, so you must be patient. Most important, this is viewed as a business transaction by the lender, in terms of dollars and cents ( not sense ), so no emotion comes into play during the decision making process. The way the banks operate can be maddening at times, so patience is a must.
There are many success stories from buyers buying a short sale, so they may be worth the investment of time, energy and emotions. If you have the luxury of time and can detach yourself emotionally from the transaction, buying a short sale may be for you. Otherwise, there are many other ways to get a great deal on a home that we’d be more than happy to share with you.
If you are interested in buying a short sale in the Cleveland area, we would be happy to assist you. But as you know by now, it just may not be a smooth easy process.
About The Authors
The above information pertaining to Cleveland Real Estate News was provided by The Schuman Team, Amy and Dan, of Howard Hanna. They can be reached at 216-346-3235 or via email, firstname.lastname@example.org or email@example.com.
We service the following Cleveland area suburbs: Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.
Why Would Anyone Want To Buy A Short Sale in Cleveland is the property of The Schuman Team and may not be duplicated or used without their written consent. ©December,2010