More Southwest Chicago Suburbs Short Sales Coming Up on the Market

Posted by Judy Orr on Friday, March 28th, 2008 at 2:25am.

I work with a lot of buyers and even I am amazed at how many short sale southwest Chicago suburbs listings are coming up that are short sales. chicago suburbs short sales

What is a short sale?

So many buyers have heard the term but don't know what it means.  A basic definition is that a short sale is where a bank/mortgage provider agrees to consider allowing the property to sell for less than what is currently owed on the mortgage.  These are also referred to as pre-foreclosure sales as the seller is trying to avoid foreclosure by attempting to sell their property.  I have heard of some areas such as Florida where short sales are accepted even when owners are current with their mortgage payments.  Normally, the home owner has to prove why they can no longer afford the property and fill out a form and write a "Hardship Letter" before the bank will even consider a short sale.

From my networking it seems like different banks handle short sales in different ways.  Most will not give their complete approval in the beginning but will just state that they will consider a short sale.  This is one thing that makes them difficult for the seller, any buyers and their real estate agents.

What is the process?

The seller has to start the process by requesting a short sale from their bank or mortgage company.  They must fill out whatever paperwork the bank requires.  It seems like the majority of banks don't offer an actual price they will accept nor will they suggest a listing price.  With a short sale listing I handled we were told the bank would not accept anything less than 20% of appraised value but they would not send an appraiser out until an offer is made.  I was never notified of an appraiser needing to view the property with the exception of the buyer's appraiser.

So the seller and I decided to choose a price that would fall within what we considered 20% of appraised value and also a price low enough to generate interest.  This was a listing that was on the market for approximately one year with plenty of showings but no offers.  We made many price reductions throughout the listing period prior to the short sale.

What happens when a property is listed as a short sale?

The property gets listed in the MLS just like any other property but agents usually warn buyers and agents that it is a short sale and needs bank approval.  They usually state to allow ample time for this to happen.  In other words, be prepared to wait for quite some time!

When my seller and I started marketing the property as a short sale and reduced the price we got an offer pretty quickly followed by two more.  The first offer was ridiculously low but this was before I was even given the bank's position that they will not accept anything less than 20% of appraised value.  The next two offers were full price offers.

I submitted all offers to the fax number I was given and in the format that I was instructed to follow.  We waited and waited.  The agents kept calling me and I kept calling the loss mitigation person I was assigned to.  Most of the time I left a voice mail.  Only towards the end was communication established.

In the beginning my seller called the loss mitigation department once a week.  After more than a month passed by (might have been near the 2 month point) he was told his file was closed.  He asked why.  The person he was on the phone with checked and stated it was closed because some of the faxed paperwork was not readable.  The seller was furious and asked why we were not notified.  The person did not know.  I prepared the paperwork over again and actually sent the information via UPS.  I was actually told that is not the way they handle it, it must be faxed!  Well, after a lot of work we faxed everything again and the ball finally started rolling.

But we still waited.  It was going on 3 months of waiting when a fourth offer came in that was over full price.  I offered all of the other buyers a chance to come up with their best and final offers.  A couple weeks later the fourth and highest offer was accepted.  Two buyers waited over 3 months to find out their offer was not accepted (I don't count the first offer as they were informed that there were better offers).

The buyer that ended up purchasing the property was happy and didn't feel the wait as they happened to come in at the right time - when the bank was actually working the file.  So these buyers didn't think the short sale was so bad after all.  I'm sure the first two buyers did not want to bother with a short sale ever again!

I am now working with a buyer that has made an offer on a short sale and we're going on 2 months of waiting.  The listing agent seems to have some communication with the loss mitigation department but he can't give us any real information because he doesn't know anything.  We either have to wait or move on.  Fortunately, my buyers have the time to wait but I think they're getting a little restless. However, I have to admit that if their offer is accepted they will have gotten a good deal.

Why does it take so long?

Once I had communication going with the short sale listing the gentleman I worked with told me if he worked 24 hours a day, 7 days a week he still couldn't catch up.  There are too many files for too few employees.

Others in the industry feel that some banks would rather let the property go into foreclosure and then sell it at market value rather than taking a loss up front.  I don't know what to think.   I have read stories of buyers and agents making an offer as far back as October 2007 and still waiting for an answer.  And I thought a little over 3 months was long!

I'm teaching my buyers about the downfalls of short sales

I am currently working with first-time buyers that viewed a short sale listing and just showed interest in another new short sale listing that hit the market.  I told them truthfully how it works and the fact that if they went this route on their first purchase it could very well be quite a bitter experience.  I've showed them good properties that were not short sales.

Of course, if they decide to make an offer on a short sale I will do so but I don't look forward to it.  Months of waiting, phone calls to the listing agent when I know full well if they know anything they'll call me.  Phone calls from my buyers asking for news when no one has any information.

Many agents I've spoken to have decided not to bother showing short sale listings anymore.  I fully understand and wish I could keep my buyers away from them.  Even if I stopped short sale listings from being sent via buyer automated searches, they still find them on Realtor.com and other online sources.  And I believe in sending my buyers everything out there.

Following are some short sale posts:

If you're a seller that is having trouble keeping up mortgage payments please call the short sale experienced Judy Orr Team at 708-536-8200.

how it turns out.

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