A short sale is where the owner of the property has listed their property for sale at an amount less than they owe the bank or mortgage company. Many times, the bank has not agreed to this reduction ahead of time. This can add months to the negotiations. The banks and mortgage companies are overwhelmed with the sheer volume of short sales taking place. Be prepared for what could turn out to be a long process.
The short sales that I have been involved with have been second homes for the Sellers. Due to some financial burden, they have put the home up for sale, but prices have dropped and the house is no longer worth what the Seller paid for it, or owes the mortgage company. The Buyer comes in at a low price, the Seller signs the contract and then it goes to the mortgage company for their acceptance. What goes on behind the scenes is, the mortgage company sends out an appraiser. They also look to see if the Seller has another property, usually their primary home, that they can put a lien against for the difference. Often, the mortgage company will respond with a counter offer. There are long periods where the Buyer may not hear any news at all. When the mortgage company finally responds, they will expect a quick settlement, so the Buyer must be prepared financially. The Buyer will most likely buying this home in “as is” condition. Banks and mortgage companies are not in the business of doing home repairs.
A short sale isn’t for everyone. What often happens is the short sale property receives an offer and it lingers out there in “mortgage land”. The Buyer becomes frustrated, sees other properties come on the market and withdraws their offer and moves on to the next property that is not in short sale but has reduced their price to compete.
The best advice is get yourself a realtor that has done some short sales and foreclosures. Their knowledge will prove valuable as they help you negotiate not only the price, but the pitfalls and benefits of what could prove to be a great deal at the shore.