Part 2 – Short Sales Don’t Necessarily Represent The Best Value To Sunriver Home Buyers…

Why Short Sales Aren’t Necessarily The Best Valued Real Estate In Sunriver…The case of the disappearing smoking deal! Part 2

Home in Sunriver located on North end of the resort

In part 1 of this blog post we explored the basic defenition of a short sale, as well as the basic structure of the short sale process and how so many short sales lose steam during the bank approval process. There are numerous reasons a short sale falls apart at the point of bank approval, here are a few examples of what could happen. The bank rejects the offer because it is deemed too low. Why would it be listed to low you may be asking…? When a owner of a property is feeling the heat of their home lenders deficient payment notices, or the counties notice of default letters, it makes it tempting to walk into a real estate office and ask a REALTOR to…just get the thing sold. When told this, a Real Estate Agent may be tempted to list it at a price that is to good to be true, so it will sell quickly. We all know what they say about something that is to good to be true, it is! So the bank gets this ridiculously low offer on their asset (the defaulted property), and decides to reject it completely or counter at a more appropriate price. At which point the counter is often rejected because the buyer is left saying to themselves, what happened to the smoking deal. This is especially true when it comes to Sunriver and other resort towns. The bank knows what they have in a defaulted property here in Sunriver, and like any business decision, will not accept less than what they know they can get for their asset. Something else that may happen, the bank gets the offer, then takes a look at the sellers financial situation and sees that Mr. and Mrs. Seller have multiple savings and retirement accounts, equity in a primary residence, and just bought a car. Needless to say, the bank holding the deed on the defaulted property wants to get paid or compensated in some way for the deficiency. The bank tells the seller to sign a note for the deficiency, (or contribution percentage of the deficiency) or they will not approve the short sale. When the seller finds out they are still on the hook for a deficiency or contribution, they decide to reject the banks terms and cancel the short sale altogether. When this occurs, the Buyer is often times left frustrated or broken hearted and the seller remains in the same place as before the short sale process started. Another major hurdle in completing a short sale occurs when the short seller has obtained a second loan against their property. This means that instead of only one bank needing to be satisfied or approve the short sale, now two lending institutions need to approve or be satisfied. Where it gets really sticky is when 1.) the seller accepts a buyers offer to purchase their short sold property 2.) the bank in first position also approves the short sale 3.) the bank in second position then needs to approve the offer. Here is the catch, the second bank is not entitled to any of their deficiency. They also don’t have to approve the sale. Typically, the bank in second position tells the first bank they want some compensation in order to approve the short sale. Sometimes the first bank agrees, sometimes they do not, other times they try and squeeze either the buyer or the seller for what ever they can in an attempt to mitigate their circumstance (the second bank). Needless to say, the buyer once again finds themselves asking, what happened to that smoking deal!

There is obviously a lot of variables and nuance to this subject. Much more regarding the subject could be discussed here, and I will likely do so as time goes on. This specific post is meant as a brief.

Some readers may be wondering what my motivation is in writing this blog post… My answer is two fold. Read the last installment of this article in part 3 of this short sale info series…

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2 Responses to Part 2 – Short Sales Don’t Necessarily Represent The Best Value To Sunriver Home Buyers…

  1. Pingback: Short Sales In Sunriver - A Good Deal? | Sunriver Real Estate News

  2. Pingback: Part 3 - Short Sales Don't Necessarily Represent The Best Value To Sunriver Home Buyers... | Sunriver Real Estate News

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