The Year-Long Sale
Have you ever heard of a “Short Sale” in real estate? Well, it’s definitely not a “short” sale! During the recession, we helped plenty of clients with a “short sale” which is also known as a “pre foreclosure” sale.
The actual definition of a short sale is: an act or instance of selling short. In a real estate transaction, a short sale is a sale that occurs where the mortgage company is not paid in full for the balance owed by the seller. When the seller does not have the assets available to pay the difference, the mortgage bank must write-off the balance that was short.
The reason we had so many short sales during the recession was because the economy as a whole wasn’t doing well and people were finding themselves unemployed and unable to make their house payments. Additionally, those that still had jobs were many times under-employed and unable to qualify for a mortgage to buy a home. On top of all of that, the lending practices leading up to the recession created a situation where many people did not have much equity in their homes to offset any losses incurred due to a sale.
This is where our story begins. We had a client who needed to relocate to Oklahoma for a job. They moved out of the house in Wylie, Texas and left the home on 5 acres vacant. We listed the vacant home for sale and got an offer pretty quickly….but this was a short sale, which required the mortgage company to approve the sale. We sent the file to the bank for approval on the sale. This included not only the purchase contract, but also the seller’s financials, a hardship letter, specific forms the bank required, and more. The bank had thousands of these types of files to review, so it was a long process. After weeks of following up and resending documents for review, we still did not have approval to accept the sale. After months of following up, we finally got approval from the bank to accept the sale. However, during the time that we were waiting the buyer who wanted to buy the house lost their job and now they didn’t qualify to buy the house. So, after months of waiting, we went back on the market looking for a new home buyer. At this point, the house had been on the market for 1 month, and we had been under contract for 4 months waiting for approval. So here we are, 5 months later and we are starting over from scratch.
Several weeks later, we got another offer from a different buyer. The new file was sent to the bank for approval, along with all of the updated financials. Again we waited weeks, we waited months, and still no approval from the bank. We waited another 4 months for approval from the bank. By this time, we have been working on the sale of this one house for 9 months.
When the bank finally did approve the sale, the buyer’s lender required repairs to the house. Of course, the seller didn’t have money to spend making repairs to the house. Over the time that the house had been for sale, there had been some damage to the vacant property….some of it caused by contractors hired by the bank. At one point, there was an inspection of the property by someone hired by the bank and they broke the back door trying to obtain access to the property. This was just crazy because we had a lock box on the front door. Regardless, the repairs were required.
Since the seller could not make the repairs, they did give permission for the buyer to make the repairs. This was a BIG risk for the buyer. If the buyer spent money repairing the house and then wasn’t able to buy it after all, they would not be repaid for their work. The buyers knew the property was the right home for them, so they agreed and made the repairs. This took another 45 days to get the approval and get the work done.
After the repairs were complete, we needed to get final approval by both banks to move forward. Of course, this took months to complete. By the time the home finally closed on the sale – and the new owners could move into their new house, we had been working to sell this house for over a year.
Being a short sale does not mean being a fast sale. In fact, this is the slowest sale we have ever been involved in.