Many Canadian clients ask us about Short Sales. It is not a term commonly used in Canada. Short sales are pre-foreclosure situations where the homeowner is about to be foreclosed on and in a last minute attempt to keep the foreclosure off of his credit history they try to sell it. The home is worth less than what he owes on the home. The homeowner must get approval from the bank to sell for less than the mortgage amount and ask the bank forgive the balance of the mortgage. There are thus 3 parties in a foreclosure: seller, buyer and bank. All 3 must approve the sale price. This is usually a very tricky situation. Most short sales do not sell. I have heard up to 80% of short sales never close. Short sales usually do nothing but waste a seller’s time and create frustration.
Short sales are handled by a bank’s loss mitigation. As you can imagine with the US credit crisis, these departments are completely overwhelmed and understaffed. It can take up to 3 months to get a response from the bank for an offer. During this time you are just left hanging. Most times, after waiting for weeks or months to hear back from the bank about your offer, they simply say no. Banks are often unwilling to accept the below market offer on the home and forgive the balance of the mortgage – are you surprised? This is often the fault of the listing realtor that puts the property on the mls for an unrealistically low price in an attempt to get any offer. Other times, during the process the homeowner just takes off and can’t be found. The seller has to sign all the documents to complete the transaction and if he can’t be found the deal can’t close. Also if the homeowner declares personal bankruptcy, which often happens, that delays the transaction until the bankruptcy is resolved. Other times, there are second mortgages or other liens on the property which have to be negotiated to clean title. During that time period many homes simply go to foreclosure leaving the buyer empty handed.
There are numerous possible problems and pitfalls with short sales. We recommend to our Canadian buyers that if they want a quick, easy super deal they should try to stick to true foreclosures, instead of wading into the murky waters of pre-foreclosures. Please feel free to call me to discuss how to tell the difference on listings between foreclosures and pre-foreclosures. for more information about short sales or to search for Foreclosures check out www.ThePhoenixExperts.com.
Marc Brodeur, Realtor
www.ThePhoenixExperts.com
1-800-300-0263
