Short Sale Realities

• Homeowners and mortgage lenders both dislike short sales. The only true winners under these conditions are buyers. They typically purchase real estate that once had a much higher value than its current worth. As market conditions improve, the home will probably increase in value. Homeowners dislike short sales because they have lost all of their former equity (ownership value). Mortgage lenders really dislike short sales, as they must agree to accept less than their full mortgage loan balance, thereby creating a true net loss.
  
  

Short Sale Time Frames

• A common reason the real estate listing stays active after your seller accepts your offer to buy is time. Your seller must submit a "short sale package" to the lender. This includes the current homeowner's income, expense and asset data to justify the short sale. The lender must examine this information first. After he decides that the borrower cannot afford to make regular mortgage payments, loan or "workout" officers must present the package, including your offer to buy, to a higher lender authority or committee. Your offer must be approved and the lender must accept the amount of loss. This can often take 20 to 90 days after the seller accepts your offer to buy, with no guarantee of lender acceptance.
  
  

Seller Responsibilities

• Short sale sellers have a fiduciary responsibility to accept only the highest offer available. Since it is a "given" that the mortgage lender will lose money, sellers and their representatives must make every effort to obtain the highest offer possible. Unlike normal home sales, the seller does not have full control over sale decisions. They have a partner -- their lender -- who has equal authority to approve or reject a valid offer. Until the lender agrees that the seller has received the highest reasonable offer possible, the offer is not legally accepted. Therefore, the home-for-sale listing can remain active.
  
  

Lender Responsibilities

• Mortgage lenders typically have two options, both unsatisfactory, in pre-foreclosure situations. They can choose to foreclose on the home or allow a short sale. In both situations, the lender loses money. A short sale typically involves less expense and aggravation, and minimizes the lender's loss if the home is in decent condition and in a desirable location. With either option, the mortgage lender has a fiduciary responsibility equal to the seller's duty to generate the most money possible. For stockholder and regulatory purposes, lenders must develop written evidence that they have taken all reasonable steps to minimize their loss. Since they must adopt a cohesive review policy of short sale offers, lenders take time to accept or reject them, often leaving a home-for-sale listing active after a seller acceptance.