One Saturday morning, my husband and I shadowed our inspection agent as he scrutinized the 4-bedroom house we’d bid on several weeks before.
I scribbled furiously in a notebook as we came upon a dead mouse next to the furnace, the gap beneath the front door and the mold growing on the roof.
All easy fixes, I told myself.
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I didn’t negotiate with the sellers regarding the small issues we’d found because it was a short sale, so it came as-is, and we’d known this going in. Plus, it wasn’t even the biggest gamble we were making.
In reality, short sales can be anything but short: They can take anywhere from one month to several years to wrap up, and these deals fall apart entirely in many cases.
A short sale is when a homeowner in financial distress sells a house for less than the mortgage value, so the bank can erase the remaining loan balance. Let’s say that you own a home with a $300,000 mortgage, but post housing crash, it’s now only worth $250,000. It will be a short sale if you sell it at the market value of $250,000 and let the bank take the proceeds in order to wipe out your debt.
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From the perspective of the buyer, it means you can get a house for a low price, but it also comes with more hoops to jump through, like waiting for the bank to approve the transaction—if it ever does.
So despite the fact that my husband and I had just spent $550 on a home inspection, we had no clue when (or if!) we’d ever close on the house.
A report from RealtyTrac reports a 33% increase in pre-foreclosure sales (that generally means short sales) in January 2012 compared to a year earlier, with annual increases in 32 states.
In other words, short sales are growing in popularity.
We Didn’t Want to Deal With a Short Sale, But …
We hadn’t intended to put ourselves through the agita of a short sale. When we first saw The House, it was the fourth stop on a marathon home-viewing tour. The neighborhood was quiet. The lawn was perfectly manicured. Sun glinted off two sets of to-die-for bay windows.
On the steps leading up to the front door, our agent shuffled her papers. She squinted against the sun, and looked closer at her paperwork. “Oh, you guys,” she said. “I didn’t realize, but this is a short sale.”
Michael and I glanced at each other. “Well, this is a total wash,” I thought to myself. Out loud, I tried to sound cheerful: “That’s okay. It doesn’t hurt to look, right?”