Ocean City MD Short Sales

So you want to Buy an Ocean City MD Short Sale?  What is a Short Sale?

A short sale can be a complex transaction.  For easy numbers, lets say the seller purchased the property in 2005 for $250,000 and they had an original mortgage of $175,000, at the time the property would have had to appraise for $250,000.  Now fast forward to today, they (The Seller) still owes about $150,000 on the property but the value in today's market place is only $125,000.  If they no longer can make the payments due to financial hardship and the market will not give them anymore than $125,000, they can then try and sell the property as a short sale, which means they are going to ask the bank to take less (short) of what is owed on the mortgage, hence the name short sale.  Basically the are asking for their mortgage company to forgo $25,000 plus the cost of selling ie. transfer taxes and commissions (roughly $9,000).  In the end if accepted by the bank the bank is looking at a potential short fall of roughly $34,000. 

As a buyer whom is making an offer on a short sale, the process starts out the same as any other listing.  We as agents make an appointment to show you the property with the sellers.  If you as the buyer like the property and would like to move forward with an offer, we prepare the contract documents, advise you as to what the market value may be and write up the offer.  The offer is then presented to the seller.  At this point the seller may choose to accept the offer and sign it, or they may opt to negotiate with you where we would go back and fourth until the contract is accepted and signed by both you and the seller.   Here is where the process if different with a short sale as apposed to a regular non distressed seller.  With the regular seller we would move forward with inspections, order title, and begin applying for financing.  With the short sale, since the seller is asking the bank to take a short payoff of roughly $34,000 the contract requires Third Party Approval, or approval from the Mortgage company. 

This is where the process can take an extended period of time.  The seller must prove to the bank the inability to continue to pay the mortgage on a regular basis, they have to have a true hardship, such as loss of employment, medical bankruptcy, or divorce.  They also need to be insolvent and can not have large amounts of funds in the bank.  At the same time the bank will order an appraisal on the property to try and determine what the true value of the property is in today's market place.  The bank will most likely ask for the buyers title company to prepare an estimated HUD 1 settlement sheet detailing the costs associated with the sale showing the bottom line to the bank.  The banks evaluation process varies between lenders and as well as the sellers situation and the type of loan they have.  I have seen the length of time be as little as thirty and as long as a year.  Also keep in mind that there is no guarantee that the bank with accept your offer.  The may opt to deny the short sale completely as the seller may not qualify, they could counter your offer, or accept the offer.  The best news would be that the bank accepts the offer or counters with a number that is still in line with the market value and we with acceptance we can now move forward with inspections, loan application, title work and you are in your new home in an additional 45 days.  The worst case scenario is after waiting for 6 months to a year, the bank comes back with a counter offer that is not acceptable to you or denys the short sale completely, now you have just waited for 6 months, while other good deals have come and gone, only to have to go back to the drawing board and beginning your search again. 

In closing, a short sale property can present a good value in today's market place and if the seller has a true hardship and the property is priced inline with the market conditions, you may end up with a good deal, BUT, the good deal may a very long time to achieve and even after waiting a long time there are no guarantees the Bank will accept the Short Sale.