Indianapolis Short Sales Explained

I am finally writing the most overdue blog post EVER, the long winded answer to the question I probably get asked most often: What is a short sale?  Quite simply, a short sale is when the owner of a property owes more than the house is worth and they ask the bank to accept an offer less than this amount in lieu of going to foreclosure.  For example, a seller has a houses listed for $100,000 and they owe $125,000 on the mortgage.  They receive an offer from a prospective buyer for $90,000 and ask the bank to take a loss of $35,000 instead of taking the home to foreclosure, re-listing it, and selling it themselves.  Sometimes it works and sometimes it does not.  

Now, the gory details.  If you are the buyer or potential buyer of a short sale you MUST know what you are getting into or you are setting yourself up for a very frustrating experience.  I usually tell people, depending on any number of variables it can take anywhere from 2 – 10 months to close on a short sale from the time you make your original offer.  Why so long and why such a huge difference?  Every deal, bank, and asset manager is annoyingly unique and each has their own idiosyncrasies that can greatly affect the amount of time it takes to close a deal.  Here are just a few variables that can affect the time frame of the short sale:

-    Is there one mortgage or are there two?
-    If two, are they with the same bank?
-    Is there a PMI company involved?
-    Is this a FHA loan or conventional loan?
-    Are you the first offer to be submitted?
-    Do you have a negotiator?
-    Who is the bank?
-    Is the listing agent experienced with short sales?
-    Is the asset manager in a bad mood?

The list goes on and on and on.   As you see, the amount of variables that affect the short sale process are mind boggling.  One of the most frustrating parts of dealing with the short sale is the absolute uncertainty and lack of answers.  Once you submit your offer, it could take weeks or even months for the bank to respond to you.  All the while you have no idea what is happening or even if they will consider your offer.   Assuming you get through this process and agree upon a price, the next process of getting from contract to the closing table can be and usually is excruciatingly s-l-o-w with little or no updates along the way.  Eventually you can close on the short sale, but you must know what you are getting yourself into and be very flexible with your timeline in order to make a short sale purchase a success.  

The importance of having an agent on your side that has experience with and understands how to best navigate through this sea of red tape cannot be underestimated.  We at Red Door, unfortunately:), work with tons of buyers and sellers in short sale situations and can help you through the process.   Contact us at 317-733-3667 or submit or contact form to discuss short sales in Indianapolis further.