What is a Short Sale and What’s involved?

Many buyers want to purchase a foreclosure home feeling that they will be able to get a better deal by doing so.  While there are a lot of good foreclosure deals out there it may be even more lucrative to buy a home that is a Short Sale.  What is a short sale?  The concept is rather simple, A short sale is essentially a property that is purchased from a seller for less than what is owed on the mortgage.  The catch is that the terms of the sale have to be approved by the lender or lenders that hold the mortgages on the property.  Banks will often agree to a short sale because in the end they may get more for the house when they eliminate all the costs associated with the foreclosure process.

Some of the costs banks pay when foreclosing on a home include:

• Attorney Fees
• Filing Fees
• Court Costs
• Sheriff Costs
• Loss of Mortgage Payments
• Holding Costs: Taxes, Insurance, Liens, Utilities, Association fees
• Cleaning costs
• Lawn care and snow removal

By eliminating these expenses the bank will often end up with less of a loss on a property.  Some short sale homes are marketed in the MLS (Multiple Listing Service) as such.  Other times agents may know of someone that is in a situation where a property owner is on the verge of foreclosure.  In Wisconsin the foreclosure process is quite long and involved.  Properties that will be put up for Sheriff auction are listed in the Daily Reporter newspaper one day each week.  Most city halls in Milwaukee County also have a bulletin board with listings of upcoming sheriff auction properties.  Contacting these home owners may yield an opportunity to do a short sale purchase.  The biggest thing to remember when submitting your offer to a bank is patience.  Short sales I have been involved with have taken weeks and months to get approved.  Count yourself lucky if the bank does finally come back and negoiate or accept your offer.  Some properties have 2 or more mortgages so getting multiple banks to approve of the transaction can be very challenging and time consuming.  If you are trying to keep to a specific time line for your purchase this might not be for you.  If you have any questions about short sales or want to know what properties are available in the SE Wisconsin market feel free to call or email me and I will be happy to help you.  troy@chowanec.com or 414-688-3678