The Phil Leng Team, Bank Owned Property Experts 206-409-6600

Help! I’m Making an Offer on a Short Sale Listing!! #3

Help! I’m Making an Offer on a Short Sale Listing!! #3

How long will it take to close?

The short answer? A short sale is a long sale.

The “short” refers to the fact that the sale price will fall “short” of paying off the entire amount of the loan (or loans) against the house. The “short” does NOT refer to how long the transaction will take.

The time to close is typically 3-12 months. I have heard of short sales taking 2 years to close. That is unusually long. I have heard of short sales closing in 35 days. That is unheard of! (I guess it is not unheard of if I heard of it!!)

Why does the process take so long?

1. The seller and buyer have to agree on the price and the terms of the Purchase and Sale Contract.

2. The seller has to apply to the bank again, just like they did 3 or 4 years before. When they applied to the bank to GET the loan, they had to prove income, show proof of funds, demonstrate job stability and longevity, and have their credit checked.

Now they are going through the same process again, to prove why it is that they now CANNOT afford the loan that they proved they COULD afford such a short time ago. They have to do a convincing hardship letter. Show job loss or business failure. Demonstrate that they have no funds to cover the amount that is short to pay off the loan at closing.

3. The bank has to decide how much money they are willing to lose. This is an easy decision. The answer is - “NONE” Banks are not in business to lose money. They are very well set up to make loans, track payments and get all the money back plus interest.

So if the shortfall between net selling proceeds and paying the loan off is $150,000, the decision is easy. The seller needs to write a check for $150,000 at closing, the bank releases the old loan and the transaction can close in 30-35 days.

If the seller does NOT have the money to make up what is short, the bank is in a quandry. How do they lose the least amount of money possible? How do they get the most money from the seller that is possible? Does the seller have hidden funds? Can they get away with closing the sale and going after the seller for the balance after closing? (That is called a deficiency judgment) How do they make sure that they are getting the highest possible price for the home? And ultimately, who makes the decision as to how much they are willing to lose?

Is it in the bank’s best interest to foreclose instead of agreeing to a short sale? Is the property likely to be picked up at auction by an investor, or is the bank going to have to own it as a bank owned property and assume all costs of holding, preserving, repairing and selling the property AFTER foreclosure?

So, how long will it take to close the sale? Anywhere between 3 and 12 months.

Help! I’m Making an Offer on a Short Sale Listing!! #2

What is in it for the seller?

We tried to make an appointment to show the short sale house on our tour and the seller said the time was inconvenient for them.

Wha-a-a-a-at? Don’t they want to sell it?

Aren’t they anxious for an able ready and willing buyer to see the house?

Why are they less cooperative than we expect a seller to be?

I guess the real question to ask is - “What is in it for the seller?”

Well... Almost without exception, the seller does not want to sell their house. They would rather stay in the house. They bought it, they loved it and the features that attracted them to the house are still there. Their kids go to the local school, they love the yard and the neighborhood, and they have gotten used to getting to work, shopping, church and recreation from this address.

The sale is called a distressed sale. That is a misnomer. The sale is not distressed, but the people selling the home are distressed. They are up side down on their mortgage. Many times one or both parties have lost their job. They have most likely burned through their savings, and in some cases, even their retirement money to stay afloat and try to save the house.

Sometimes the home has become distressed for lack of hope or having money to do repairs. And the transaction is sometimes stressful and distressing, but it is the owner of the home that is actually distressed.

So what is in it for the seller?

Lots of distress and nothing positive. Until recently, short sale sellers were prohibited from making any money at all, in any way, from the sale of their house.
The process of doing a short sale hurts their credit score. They could possibly face a deficiency judgement to repay the bank for the money the bank lost on the loan. The law states that the IRS could demand taxes for the money they did not pay back, considering it as “income”


Many families find it hard to even rent a home after a distressed sale. Their credit is bad and they used up any reserves they had trying to save their house.

The only benefit to the seller for selling their house as a short sale is that if the house goes to foreclosure, the hit on their credit report is even more severe than if they sell as a short sale.

Help! I’m Making an Offer on a Short Sale Listing!! #1

Help! I’m Making an Offer on a Short Sale Listing!! #1


The price is low, low, low!

Why is the price so low?

First of all, the price is low because the seller is getting no money at closing, so it does not matter to the seller what the price is. If the price is at market value, or if the price is below market value it makes no difference to the seller. They are getting no money at closing.

Second the price is low because there is a stigma against short sale listings. Roughly 4 out of 5 never close at all, so a lot of buyers avoid short sales completely. Less buyers means less price.

Third the price is low because the listing agent has to bait a buyer and a selling agent to see the house, show the house and make an offer. That is accomplished by setting an unusually low price on the home.

Fourth the price is so low because the seller will likely do no repairs on the home. The buyer will have to accept the home in its “as is” condition, and any repairs needed will be paid for entirely by the buyer. This increased risk, and increased possible cost, makes the buyer less willing to pay full market price.

Fifth, the price is so low because there will most likely be no closing costs paid for by the seller. Most first time buyers need this help to complete their purchase. With another large section of buyers unavailable to purchase the home, the property will get less than market price.

Sixth, the price is so low because some listing agents hire a short sale negotiator for one per cent to one and a half percent of selling price, and they ask the buyer to pay that fee on top of the negotiated sales price. That ends up being a hidden cost that is not reflected in the price being advertised or offered to the public. A nasty surprise to most buyers, to be sure!

Help! I’m Making an Offer on a Short Sale Listing!!

Help! I’m Making an Offer on a Short Sale Listing!!

The price is low, low, low!

This is the best deal out there! The house is exactly what we want! We did not think we could get everything we wanted in our price range - but here it is.

Please, we have to see inside RIGHT NOW! Someone else might snap it up! Please, drop what you are doing. We must get inside. We have already driven by the outside - TWICE TODAY!!

I agree to show the house.

But I ask some of the strangest questions.

1. Do you know that the listed price may be lower than you will have to pay to get it?
2. Do you know that the seller will get nothing for selling the house?
3. Do you know that it may take a month to close? But it could also take 3 months to close? Or 8 months, or 9 months, or 2 years to close?
4. Do you know that, although the seller will sign the Purchase and Sale Agreement, the bank with the loan on the house ultimately determines if it will sell or not?
5. Did you know that another real estate agent, who has nothing to do with the seller or with us, has the power to kill our sale?
6. Do you know that the bank will give a price that you will have to pay to get the house? And did you know that the price the bank will demand may be substantially higher than the price the house is listed at?
7, Did you know that the seller might back out the last day before closing? Did you know WHY that might happen?
8. Did you know that if there is a second, or third, or fourth mortgage on the property, there will be a dog fight among the banks, to see who will get paid, who will lose out, and who will get nothing at all? Did you know that that dog fight could determine if you get the house or not?
9. Do you know that the seller may be completely broke, and unable to fix a single thing that you might find wrong with the house?
10. Did you know that the seller is UNABLE to help you with your closing costs, and the bank may be UNWILLING to help you with your closing costs?
11. Did you know that after waiting 2-12 months, the bank might demand that you close in 12 days or lose the deal?
12. Did you know that the bank will probably squeeze the agents at the last minute before closing? The bank may demand that they lower the commission they have been promised or the bank will threaten to kill the deal? Did you know that some agents will stand up to the bank, even at the last second, and get paid the commission promised, while other agents will capitulate?
13. Did you know that the foreclosure calendar is ticking, and the house may be foreclosed on after you have an accepted offer, and your Purchase and Sale contract would then be null and void?


14. Finally, did you know that there are some short sales now that are completely different? Prices are preset, closing is 45 days or less, and the seller gets paid to cooperate?

Let’s go ahead and look at the inside of the house.

But I want you to know all about the process before we write the contract, so you do not lose money, or lose hope, or get disappointed later on!

Cooling Off

Cooling Off

The grandkids invented a new game called “The Slide”
In it they climbed up and slid down, or ran down, or hopped down the coffee table some 50 times.

The older one decided it was time for a cooling off period. However, when she sat down in her little chair, she felt even more sweaty than before.

Time to go outside to cool down.

Of course, the wide expanse of grass called irresistibly for a run...

The video ends with the most magical sound on God’s green earth. The giggles and laughter of a happy child...