Market Insights: Short sale worth purchasing?
There is a buzz in the marketplace about short sales being “a great way to get a deal”.
As a Certified Distressed Property Expert (CDPE) for the past couple of years I am extremely experienced with short sales. Below are concise answers to the questions I hear most frequently from buyers.
What is a short sale? A short sale is a sale of real estate when proceeds from the sale fall short of the balance owed on the property’s loan. In Summit County if a property was purchased at the peak of the market with an 80 to 100 percent loan and is being sold today it will likely be a short sale.
Why would a bank accept less than the amount owned? The lender believes that selling the property at a loss will generate them the most money. Lenders, in general, do not like owning real estate and a short sale allows them to avoid the costs and hefty fees involved in the foreclosure process.
Does this mean shorts sale are sold below the current market value? Yes and no. Most banks are astute. They do their homework before agreeing to a short sale contract. Some banks are happy to sell below the market value while others strive to obtain market value. Also keep in mind there are sellers out there who have owned a property for twenty years that could be willing to sell their property for less than a bank will accept.
Is it true the process takes a long time? Yes. Negotiating with banks takes skill and a tremendous amount of experience. If the broker representing the property is not intimately familiar with the inner workings of banks it could easily take six months or more from contract to closing. The shortest time I have seen is a sale that my team completed in five weeks.
Is the wait and hassle involved worth it? It can be. The rule of thumb: The more expensive the property the more it is worth it. For example the home in the photo, located at 7 Barney Ford Breckenridge, was a short sale that closed on Feb. 5, 2010. It was well worth the wait for this buyer who picked up the property for about 25 percent or more below the market value.
25 percent below the market value. That sounds great. How do I get started? There are two steps. Step one – learn as much as you can. The National Association of Realtors has several publications that our clients have found very informative. Step two – interview at least three brokers and select the one with the most knowledge and experience in dealing with short sales.
Daniel Webster Johnson leads Team Your Mountain Broker and is a broker associate at Resort Brokers Real Estate. He can be reached at (970) 393-3300 and at daniel@YourMountainBroker.com.
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