Not for the Weak

Buying a short sale home is not for the weak or faint at heart. I feel like I keep talking about waiting for the home, but I never imagined it would be this difficult emotionally. Talking about it is one of the only ways to get me through it. Let me explain what a short sale is, and what is involved with completing the short sale.

Idaho was one of the hardest hit states when the housing market crashed. Home prices are at their all-time low right now, but what that translates in to is the majority of the homes for sale here are all short sale homes. A short sale means that the owner owes more on their home than they can sell it for. The majority of the homes we are looking at were originally purchased between $120-150,000. The owners cannot sell their homes for that much right now, they are forced to sell them at a much lower (usually about $50,000 lower). Unless they have $50,000 cash to pay off the rest of their mortgage, the owners have to get approval from the bank to sell it "short sale" or go into foreclosure on their home. The owner then has to jump through a billion hoops and turn their sale of their home over to the bank.

Once the owner has received permission to short sale their home, they list it at a competitive price to lure buyers in. If they have a buyer, the owners sign an acceptance form and turn that in to the bank. The home remains on the market, and the home owners will continue to accept additional offers if they are above the first offer. That bank is probably several states away. You can imagine a desk full of papers piled up high from all the other homes that are short sales at the moment. The bank has never seen the home, they don't know what it was listed for so they will order a BPO (broker price opinion). A local agent will go see the home, compare it with other homes for sale in the area and give their "opinion" on the price the home should be sold for. The bank can then approve that price or reject it. If they approve it, they will continue the process, a billion forms have to be signed and eventually they will accept the offer to go under contract with the buyer and proceed to closing. More often than not, the home owner has a second mortgage, a home equity line of credit taken out, are behind in their property taxes and have a lien from the county, or numerous other debtors that all need to "settle". A "short" sale on average takes 6-9 months to get to closing.

We thought we were jumping in this process at the latter stages. Instead of pulling the original offer that was made, the homeowners signed a "change of name" form that replaced the our names with the previous names and allowed us to keep their place in the system instead of having to start all the way over. We were under the impression that the bank had already approved the selling price of $80,000. We had hoped that we'd be able to move quickly and have more information by now as to when we can expect to receive our approval letter. The selling agent we are dealing with tells us "Oh, we're 1-2 days out" and then a week and a half goes by where we are waiting for a phone call EVERY day. He also told us 3 weeks ago that the house would be listed as pending on the MLS so we don't have any offers come in above ours, that is yet to be done. He won't return our Realtor's phone calls or e-mails and we are starting to get a bad vibe that we are just being strung along. We don't trust him. It's extremely nerve wracking. I wish I could just go find another house and be done with it, but the majority of the other houses are also short sales (I do not want to start all the way over), or they are bank owned & just enough out of our price range.
We're not even 100% sure the bank is going to accept this sale! We are yet to have an inspection on the house because we don't want to pay for an inspection on a home that we can't even buy and nothing can be done until we have the acceptance letter from the bank. It's beyond frustrating. It's exhausting and we've only been waiting for a month. I can't do it another one. I'm not sure I can do it another week. We told our agent if we can't get a status update from the bank on Monday, we're ready to throw in the towel and will try to aggressively go after some of the bank owned and try to low ball them. Keep your fingers crossed for us that we can get some solid information! I'm needing something good right now.