When a Short Sale is right for you

(c) Copyright 2006 by Cal Franklin

In most states, the process takes a few months, which is just how long it takes banks to negotiate with these investors over a price. If there isn’t enough time for that before a foreclosure’s auction date, banks will usually postpone the auction to give the investor enough time to attempt the short sale.

A successful investor will make a case, much like building a court case, about how the home isn't worth so much, and how the homeowner can't afford it for so much longer, how the area is in decline, how the market is going down, and so on, making the house look like the worst possible investment for the bank. The Homeowner will have to supply this investor with some information and sign an authorization agreement so that the investor can speak to the bank on his or her behalf.

In some states, like Kansas for instance, Short Sales are so common that the banks actually plan for their short sale up front with any property that isn't in a hot marketplace... Their realty agents will be instructed to lower the selling price to a short sale price after so much time has passed!

Naturally, where the properties are worth more, the lenders fight harder for it, and so investors need to be savvier, making better cases to fight back with. In the end, the story is usually the same... The bank always lowers the price as far down as the investor has convinced them to go and the investor walks away with a property at a great price, helping the homeowner avoid a foreclosure.

That isn't to say that there is no risk at all...

There is one thing about the Short Sale process that homeowners need to be cautious of. Remember how on the regular foreclosure process a bank can still sue the homeowner afterward for the unpaid balance? Well, banks will be banks... Short Sales have the same danger, unless you know what you're doing. In fact, the amount that the bank can sue you for could even be larger, since the investor has talked them down, they sometimes come after the homeowner for that difference in price, too!

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