The long and short of short sales
... and I'm not talking about short sales of stocks which are at the epicenter of falling prices on Wall Street.
No, I'm talking about real estate "short sales". And what it means is that after the proceeds of the sale, the seller will not have enough proceeds to pay off their mortgage. In other words, they are "short" funds. And there are a number of them "clogging" up the Charleston MLS.
Why do I say they are clogging up the MLS. Quite simply, to the Charleston home buyer, they look really good because the prices appear to be significantly below market prices but short sale listings are bogus because you generally can't buy them.
One of my clients has been selecting homes to see and the first two choices they made were short sales and after I explained the situation and the problem, they started looking for other choices.
So what's the problem. The price is good but you know the old saying, if it looks to good to be true, it probably is. And the bottom line problem is that generally you won't be able to buy the house because the contract has to be approved by the lender or lenders and not only will it take a while to get a response but more often than not, you won't even get a response.
Here is some actual verbiage from a typical "short sale opportunity" listed in the MLS. This information generally doesn't reside in the public side where a potential home buyer will see it but rather on the agent side.
UPDATE: XXXXX IS NOW STATING THEY WILL ACCEPT $XXXXX. WHAT WE DON'T KNOW IS WHETHER THEY INDICATE THAT FIGURE AS A NET PAYOFF, OR A GROSS CONTRACT PRICE. SO I HAVE SET PRICE ASSUMING IT IS A NET PAYOFF FIGURE. SO --- MAKE AN OFFER!! WE'LL SUBMIT IT TO XXXXX AND SEE IF WE CAN MAKE IT HAPPEN. XXXXX AGREED TO CONSIDER A SHORT SALE IN NOVEMBER OF '07. SELLER RATIFIED CONTRACT IN MARCH OF '08. XXXXX WAITED UNIL WEEK OF JULY 21, 2008, TO RENDER A DECISION DENYING THE SHORT SALE. XXXXX REFUSES TO COUNTER OR TO CONSIDER ANY PURCHASE PRICE UNDER A FULL-BALANCE PAYOFF. THE ABOVE PRICE REPRESENTS THAT ESTIMATED FULL-PRICE PAY-OFF AT THIS TIME. This is a short sale situation and will require additional time to secure approval by XXXXX. Home is being sold "as is, where is" and does need TLC. Please note that this is a short sale situation with XXXXX, so please tell your buyer's that we will need additional time to get bank approval of short sale. XXXXX paperwork promises 2-4 weeks, but clearly that did not happen in this past case.
Now I don't know about you but if you really liked a home and couldn't even get an answer, wouldn't it be better not to even bother looking at it. Take a look at the dates above, on the market in November 07, a contract was offered in March 08 and no answer by July 08 and it is still "on the market" in Sept 08. Almost a year later, there is very little likelihood this home will sell until it goes to foreclosure when it will then be reasonably easy to buy in a timely manner.
Amy Jones in Phoenix had this to say about short sales.
"Short sale - The oxymoron of the century. Short sales are neither short and often don't result in a sale".
Well said Amy! 
Photo courtesy of Flickr by mava.