“Short sale” has almost become a media buzz word. The concept sounds great but it almost never works. A short sale is a market sale of the house for less than what is owed to the bank on the mortgage. This requires the consent of the bank as it must release it mortgage in order for the sale to close. The bank will want proof that it is getting the most it can from the house. If you want a release for any unpaid balance (which I recommend) the bank will want proof that you are uncollectible. This means the bank will want your financials with supporting documents and proof of the market value of the house. The bank will take all this information and shuffle it around for a while and get back to you.
In the meantime you cannot accept the offer. This offer typically expires in a few days. A month later when you hear from the bank, you will discover that your potential buyers went and bought one of the other dozen houses on the market that suits their needs and can close immediately. If you accept a short sale offer without a committment from the bank to release the mortgage you got yourself a lawsuit that you will lose. The purchase offer usually expires in 2 or 3 days so the buyer can walk away after it expires. An offer is open until accepted, rejected or expires. If an offer is still open a buyer can withdraw the offer anytime prior to acceptance. With the number of houses on the market there is no reason for a buyer to wait around for your banker.
Do You Have Time For A Quick Story?
Let me share a recent experience I had with a client in Ohio. This involved an estate where the man who died was single, had a house with a mortgage and little other assets. He was already 3 months behind when he died. The bank filed foreclosure. Months later with the foreclosure still pending, a purchase offer was received. It was 10% less than the mortgage balance. Over the next month after four conversations with four different bank officials and four different acceptable payoff balances (none equal to the offer price) the buyer walked away. The house sold in foreclosure months later for 30% less than the mortgage balance.
My conclusion – banks are stupid and short sales rarely happen.