Short Sales

Learn about the pros and cons of these distressed properties.

Contact a local Realtor®

Short sales, also known as pre-foreclosures, are a type of property on the market. Unlike how they sound, a short sale can actually take several months to close, if they in fact close at all.

Numerous factors can determine the likelihood of a short sale making it to the closing table. Educating yourself on the overall process can save you time and money.

What is a Short Sale

A short sale occurs when the lien holder, often a mortgage lender, settles on a loan for “short” than the balance owed. This is one method used as an attempt to avoid foreclosure. This selling option allows a bank to recoup any potential losses.

When the real estate market crashed, short sales made up about 60% of the local listings. Today, they only amount to about 2% of current listings on the market. This is a result of a strengthened economy and low unemployment rate.

How to qualify to sell as a Short Sale

If a borrower has fallen behind on their mortgage payments, their mortgage company may be inclined to allow the borrower to sell the property as a short sale.

Falling behind on payments isn’t the only reason a lien holder may consider a short sale. Other reasons can include:

Unexpected Illness
Job Loss
Death of Mortgagor or Co-Mortgagor
Imprisonment
Unable to Sell at Market Value
Pre-determined Hardship

Request Short Sale Help

If a borrower has become ill, loss their job, etc., they may take these matters into consideration to grant a short sale. Since each company’s policies can vary, you should check with yours to determine their guidelines.

Buying a Short Sale

With the massive amount of inventory on the New Mexico real estate market, you’ll inevitably come across a distressed property such as a short sale.

Home buyers should spend quality time consulting with a knowledgeable real estate broker to understand the transaction process of a short sale before considering them as an option in the house hunting.

Approved vs. Unapproved Short Sale

Knowing if a listed short sale is approved or unapproved will make a world of a difference. If a short sale is approved, you can close on a short sale in as little as 2-4 months.

This is because the homeowner’s mortgage company has received necessary documents from the homeowner, ordered appraisals and/or BPOs (Broker Price Opinions) and have approved a specific list price.

When a short sale listing has not been approved, the overall transaction can take 6 months to over a year to close. This is due to the fact that the bank for one, may not realize the homeowner is attempting to sell as a short sale or is barely in the initial stages of seeking permission to sell as a short sale.

A very important factor that can determine the time-frame of a short sale, is the Listing Broker's and Buyer's Broker experience with distressed properties.

List Price on a Short Sale

It is important to understand that the list price shown on a property, more than likely is not the approved or acceptable price for the property. While the home may look appealing and a steal for the price, keep in mind, if it looks to good to be true, it probably is. Far too often, a list price is reduced without the mortgage company’s knowledge or permission in order to attract a home buyer to submit an offer. This can lead to heartbreak, not to mention months of wasted time.

As-Is Condition

Be prepared to accept the home as-is. The mortgage company in most cases, will not make any repairs to the property.

Then, since the homeowner is in a distressed situation, they may not be able to afford to make any repairs, even if the repairs are lender required.

You should be prepared to personally be required to make the repairs, especially the lender required repairs prior to closing on the home with no guarantee of reimbursement if the sale falls through.