I get questions from buyers on a daily basis in regards to short-sales. I could probably write a book on the process of buying a short-sale or a foreclosed home, but I’m going to consolidate it down to a few paragraphs.

 There are three stages of a distressed property.

Step 1. Short Sale (Subject to 3rd party approval) – The seller is experiencing a financial hardship and they need to sell the home. The seller lists the home with a Realtor to find out they owe more on the home than it is worth (hence the term short-sale). The Realtor or the seller communicates with the bank and lets them know they are going to try to sell it short. The bank will usually not elude to what they will be willing to sell it for until an offer is on the table. The bank will say… “show us an offer and we will talk”. These homes are listed at a price that usually will not be accepted by the bank. Homes are listed to encourage offers and can be a bit misleading. When an offer is received and sent to the bank, it can take a couple months for them to respond (yes I said months). Typically homes have multiple liens on the property and ALL lien holders must agree before the home can be sold. Listings with this status can take up to a year to close on depending on many factors.

Step 2. Short Sale (Approved by 3rd party) – The bank has received an offer and has responded with either an acceptance OR with a “We won’t take this offer price, but we will take $XXX,XXX”. If the original offer was not accepted,  the first person to put in an offer at the approved price gets it. If you put in a lower offer then the bank will need to review offers again which could take weeks or even months for a response. After a bank approves a price you could close in a matter of weeks depending on the bank. If the price is approved, the bank usually has acceptance from the junior lien holders to sell the home as well.

Step 3. Foreclosure – The home never sold as a short sale and the home goes up for auction at the county steps. Junior liens are wiped out and if nobody bid on the home at the county steps, the home goes back to the bank. The bank hires a Realtor to market the home and generally prices it for a quick sale. The bank is usually quick to respond and wants to close ASAP. This is the easiest of the three steps.

Most of my clients avoid Step 1 listings as the price really is a shot in the dark. Be prepared to pay as much as 20% over the list price on a Subject to 3rd party approval listing. If you have a lot of patience to find a home, then buying a short-sale can be a great avenue. If you are looking to buy a home in the coming months, I’d recommend you avoid Subject To Short Sale listings.

Keep in mind distressed properties do not always equate to good deals.  There are many motivated sellers out there that are not losing their home and will sell at a great price. A lot of distressed properties need work and usually come with no disclosures from a seller going over any issues the home may have.

Today more than ever, it is important to have a Realtor on your side when buying or selling Utah real estate. Real estate has become more specialized over the years in an ever changing industry.

Contact us today at 801-999-8005 to talk to a Zoom Real Estate Realtor.