Legally the property is owned by a person or entity and it could be occupied by the owner or a tenant or it could be vacant. This homeowner is in a negative equity situation meaning that the sales price less any closing costs is less than the debt on the property. The owner needs approval from the lender for the sale to take place.
These properties may be listed at, above or below market value. In most cases the lender has not approved a sale so the buyer doesn’t know if his offer, even at list price, will be accepted.
Most of the time these homeowners are behind in their mortgage payments. This brings up the other issue of home inspection repairs. While it might be nice to have repairs made, the seller certainly doesn’t have the resources to make them and the lender is very unlikely to do so since they do not own the property. This makes trying to buy a short-sale property that needs repairs using conventional or FHA financing challenging at best and an exercise in futility at worst. This, along with the months it may take for a lender response to an offer, contributes to the low success rate of completing a short-sale transaction.
Of course, there are always exceptions, but they are rare. I have lived through one of these exceptions. The good news is that my buyer clients, whom I represented in the purchase, survived also (although it was a harrowing experience right through the closing)!
I will get back to you with any good news (lots of promises) about this process.
sharonriegert
