Short-Sales in Orange County, Los Angeles, Riverside, San Bernardino, and Ventura County

What is a short-sale?

A “short-sale” is a real estate sale in which the owner owes more on the mortgage than the current market value of the property.

What makes a short-sale more complex than a standard-sale transaction?

In a short-sale transaction, the homeowner may take initiative to list and market the property, however, the authorization for the final sale price and terms ultimately rests with the lien holder(s) – the mortgage company. Due to this circumstance, the listing price may not be an accurate indication of the price that the lender will accept. Processing a short-sale file is substantially more complex than a standard transaction, and the timeline for closing may be several months.

Why do short-sales take so long?

Typically, the banks do not begin processing a Short-Sale file until after an offer has been received on the property. Most real estate agents are aware of this protocol, and take aggressive measures to get an offer to the bank as quickly as possible. Unfortunately, this usually means marketing the home below a fair market value to induce a quick offer, and then waiting on sale authorization from the bank’s loss mitigation department. Depending on the bank, the integrity of the listing agent, the strength of the offer, and numerous other factors, short-sales may take several months to process.

What is “loss mitigation”?

When a Short-Sale offer has been received by the bank, a team of loss mitigation experts will go to work to underwrite the transaction and authorize a sale price. Loss mitigation involves a strict market analysis of the subject property by objective third-parties. Loss mitigation typically includes valuation by a real estate appraiser and one or more outside real estate professionals. Despite common belief, most short-sale transactions are very well thought out by the banks, as to minimize their losses and obtain a fair market value for their asset.

Aren’t short-sales a better deal?

Whether or not a property is a Short-Sale, Bank-Owned (REO), or a Standard Equity Sale, all of these properties are competing for the same prospective buyers. The primary difference between each of these transactions is the marketing strategy and terms of sale, not the final sale price.

• A Standard Equity Sale is typically priced above market value, and negotiated downward by buyers. Marketing periods are, therefore, usually much longer.
• A Short-Sale is typically marketed below a fair market value to induce a quick offer, but is often only authorized for sale by the bank at a higher price.
• A Foreclosure/Bank-Owned/REO property is typically marketed at a very acute price-point reflecting market value, or slightly below market value for quick sale.

Regardless of the marketing strategy, the same prospective buyers are competing for these homes. In order to compete with the Short-Sales and the Foreclosures, a typical seller who is not distressed has to reduce their price to be competitive. The banks, conversely, look at recent market sales to determine what is a fair price for their assets. In erratic times like these, there is actually much more consistency in the marketplace than one might expect.

Ultimately, the market works everything out. Short-Sales and Bank-Owned transactions have been driving the real estate market for some time now, and the price variance between distressed sales and standard transactions has become smaller and smaller.

It is recommended that all properties be considered in your home search, as limiting your interest to only Short-Sales or Bank-Owned properties is often counter-productive.