Why the SHORT in short sale?  Is it the short turn-around time by the bank?  Yeah-right!  Is it the short tempers that are produced by the end of the transaction?  Getting warmer....

A short sale is named for the fact that the bank in the transaction is agreeing to take an amount that is "short" the full amount owed.  This seems to be the only part of a short sale that is short.  In fact, I can assure you that by the end of the deal, the time frame has usually been extended far beyond everyone's expectations.  And with experience as my teacher, I have learned that by the end there is a high liklihood that tempers will be very short as well.  It's not always like that, but suffice it to say that there's a lot of waiting involved.

Why buy a short sale?

Well, you can save money if the deal goes through.  Short sales typically are accepted at 85% to 90% of market value and when you're buying a big ticket item like a house, that's a lot of savings.

You have to remember, though, that you are pretty much buying the house as-is because the seller is usually unwilling or unable to make repairs.  Using the purchase agreement created by the Arizona Association of Realtors you have a 10-day inspection period after the bank accepts your offer to inspect the home and you have the opportunity to walk away from the purchase at that time if you so desire.  You can also ask for repairs - sometimes the seller can/will do them and sometimes the answer is "No".

Why pass on buying a short sale?

By far, the most painful part of the experience is the extensive wait.  Buying a home is an emotional experience for 95% of the population.  When you make an offer on a home being sold as a short sale, you don't know whether you get to buy the home for at least a month or two, sometimes longer.  Even though the seller signs the contract, it still goes to the bank for approval and the entire deal is contingent upon that approval.

What happens if you wait for two months only to find that the bank is not going to accept your offer?  That can be very difficult to deal with.  While banks typically will counter, there are times when there is more than one lien holder on the property and all of those lien holders have to agree.  It is not unheard of for banks to become stubborn with each other and send a home to foreclosure over a couple thousand dollars.  In that case both the owner and the potential buyer are stuck in the middle.  It might be interesting to note that investors suffer in this case, too.  While a loss is never a good thing, the bank's job is to mitigate that loss.  If they foreclose the loss is typically much greater than selling a property short.