While the number of short sales has surged in recent years, closing
on such transactions still poses plenty of challenges along the way that
can threaten to derail the deal.
Real estate professionals told the Los Angeles Times that
negotiations remain a sticking point in these transactions because
sellers can agree to any amount on a home sale but it’s the lender who
ultimately has the final say. Compounding the issue, many lenders also
are still reluctant to even discuss a short sale with a seller until a
purchase contract is in place.
“That means the buyer who makes the first offer is a guinea pig,
because nobody knows whether the lender will even accept a short-sale
offer,” the Los Angeles Times reports.
Sometimes short sales are listed at a "ridiculously low price" to
start getting offers in and to begin the negotiations with the lender,
according to the National Association of Exclusive Buyer Agents. But
even if a lender initially approves a short sale, it’s not fully binding
yet and the lender can still easily back out of the transaction, NAEBA
reports.
Another big hurdle agents report with short sales is that once
lenders do approve a short sale, they tend to require it to close within
a short time frame. But that short time may not provide enough time to
the buyer to have the home examined by a home inspector.
Some buyers, therefore, may opt to have an inspection done on the
home prior to a lender’s approval of the short sale. However, if the
lender rejects the offer, the buyer could lose the money they paid for
any inspections. Buyers also could lose the upfront money they spent on
credit reports, application fees, and the appraisal if the lender later
drops out of the deal.
Source: "Short-Sale Purchases Can Easily Fall Apart," Los Angeles Times (Oct. 28, 2012)