Should I be looking at short sales if I’m relocating?

January 16, 2010 by · Leave a Comment 

In our market, like many others around the country, you’ll find an abundance of short sales amongst the homes listed for sale. In particular you’ll find a lot in the outer suburbs, including near Fort Belvoir and Quantico. If you’re PCSing to the Washington, DC, or Northern Virginia area, should you be looking at short sales?

Probably not. Let’s cover some basics to see why.

What is a short sale?

House Under WaterIt’s a sale where the debt owed combined with the costs associated with the sale exceed the property’s market value.  In other words, the borrower (owner) is “underwater” on the house.  The creditor(s) MAY be willing to agree to allow the property to be sold for less than the loan amount.

You can recognize these listings by key phrases in the comments section such as “short sale” or “third party approval required” or “lender approval required.” They are typically priced very aggressively so they get a lot of buyers’ attention.

How long do they take and why don’t they close?

Though the stats are far better than they used to be, relatively few short sales close – about 1 in 8. The reasons are varied: they are tremendously complicated transactions, they require demonstration of true financial hardship (not simply being underwater), they required reams of paperwork, they take a long time causing frustrated buyers to walk away, and all the while the seller is playing ‘beat the clock’ against the foreclosure department. There are even some who say that banks make more money in a foreclosure than a short sale so the incentives for the bank to cooperate are not there. Of course, you have to look at each case individually, and there ARE some ways that you can optimize the odds of (though not guarantee) a short sale closing.

So in summary, it is notoriously difficult to close a short sale, and the timing is impossible to predict. You can read more here. If you’re on a timeline for a move, then short sales, in most instances, are not going to be a viable option for you. If you do decide to pursue a short sale, make sure you have contingency housing plans in place.

If you’re PCSing to the DC area and starting your home search, call us to talk about timing and the current state of the market. We’d love to help you find your next home!

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