I am so tired of reading this in listings.  Of course the OWNER is motivated… they have to be motivated to undertake a process that will leave their credit in ruin potentially for YEARS.  The Owner is walking away from their HOME and accepting as much as a 250 point derogatory on their credit.  People who have built and safeguarded their 700+ credit scores will fall into the 400s and have trouble RENTING, buying cars, getting and keeping credit cards (yes, some credit cards will revoke your card privileges after such a dramatic problem)… but OWNER MOTIVATED means Nada in a Short Sale… the OWNER has nothing to do with it.

What I would like to start reading is:

• BANK Motivated
• Bank will work each offer in order
• Guaranteed, In-Writing 72hr decision
• Tenants ready to move ASAP (why sellers are signing 1yr leases is beyond me…)
• Guaranteed closing within 60 days (30-45 would be too good to be true)
• Bring your FHA Buyers (haha…I’m reaching now)

Recovering in this housing market is possible…but with all the distressed properties out there creating enormous inventories, BANKS are going to have to start figuring out how to abbreviating this process.

Right now, a potential buyer of a short sale gets to follow this process:

• Find and fall in love with a house in the neighborhood that they’ve been watching for a year
• Write an offer with their Realtor
• Sign the Short Sale Addendum allowing the bank to take their sweet time
• Learn that they may need to guarantee their Realtor’s commission because the bank may up and decide not to honor the listing agreement’s commission guarantees
• Put the offer in anyway & Wait…
• Find out they were the first offer and the bank typically takes 4-5 offers & Wait…
• Find out that the seller has not completed all of their paperwork & Wait…
• Find out that the house next door which is more desirable sold for less than their offer without a short sale…start hating their Realtor
• Find out the Bank has sent out for 2 appraisals on the property & Wait…
• fast forward 3 months… there are two offers on the table and the seller has moved out and turned off the power, removed the appliances and left the windows open during rainy season…

Does this sound like fun?

Well…this is how it works…note I have still not shown a conclusion.

What usually happens is that the buyer cancels their offer and gets their money back.  The bank still waits for more offers.  When the Bank gets their obligatory 4-5 offers then they take the top two and encourage a bidding war…

Then a magical 4-5 months later, the Listing agent calls the Buyers Agent to tell them that the bank never cancelled the contract and wants $20,000 over list price which is way over budget.

Tips to remember to avoid this mess:

• People in this market are getting good DEALS…but STEALS are few and far between.
• Often the List Price and Sales Price have nothing to do with each other… The bank has a number of factors they use to set the bar on what they will accept and they usually don’t factor in what Buyers think they’re worth since they’re "Distressed".  Banks want Fair Market Value for their Short Sales
• The Bank has no motivation to take the additional costs of a Foreclosure - so waiting for it could take a while… and if they won’t take those costs, why would they want to essentially take them off the sticker price?
• Short Sale does not mean VALUE.  Just like a Bank Owned - they may have significant deferred maintenance and cleaning up necessary to get them ready to inhabit. 
• Often the BEST VALUES are Conventional Sales with a seller that either has a low mortgage or the cash to come to the table.
• Realtors that PUSH Short Sales are not necessarily understanding the process themselves… and how does that help you, Mr./Mrs. Buyer??
• Short Sales are more geared towards Investors than Homebuyers because Investors can afford to wait and already have factored in the costs of fixing a distressed property.