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reproduce portions of this site or materials available at this site for personal and
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You should consult an attorney for advice regarding your individual situation.
Contacting an attorney does not create an attorney-client relationship. Do not send,
e-mail, or provide confidential information or information you do not wish to be
publicly disseminated until such time as an attorney-client relationship has been
established and requested to do so by an attorney.
Copyright 2009 Law Office of Craig W. Little, P.A. All rights reserved. You may
reproduce portions of this site or materials available at this site for personal and
non-commercial use. All copies of portions of this site or materials available at this
site must include this copyright statement.
Web Articles
Analysis of Short Sales of
Residential or Commercial Property
Buyer's Considerations
Due Diligence a Short Sale Buyer Should Undertake
Because of unique aspects of short sales, there is certain due
diligence that is unique to buyers examining potential short sale
properties and short sale listings.
The buyer evaluating a listing for a potential short sale property
must be aware of unique aspects of the listing price. With a
traditional sale, the seller sets the listing price and the seller
decides which offer they will accept therefore the listing price in
a traditional real estate sale is somewhat tied to the ultimate
sales price. The listing price of a short sale property is also set
by the seller but it is the lender who will ultimately determine if
the offer from the buyer is acceptable. The lender may not
even know the list price when it is evaluating a seller and offer
to purchase the property in a short sale. Also the seller of short
sale property does not have any incentive to obtain the highest
possible price because the seller will not be receiving any of the
short sale proceeds, all of the proceeds will be going to the
lender. Therefore short sale sellers will sometimes price
property at low prices to get numerous offers in quickly to
hopefully sell the property quickly. But ultimately the lender
determines what will be an acceptable price and therefore the
listing price, which is set by the seller, is rather speculative in
nature and may have little bearing on the final sales price.
The comparable sales that the buyer examines when evaluating
the listing price on a potential short sale property should be
other short sales that have closed. Short sales are generally
priced somewhat below market value. Therefore to properly
evaluate a listing price on a potential short sale property, the
buyer needs truly comparable sales data. If sales prices
specifically related to short sales are not available then sales
prices of comparable, non-short sale properties can be utilized
but such prices should be somewhat discounted to account for
the short sale.
When evaluating a potential short sale property, the buyer
should research how many loans are secured by the property
and how much is owed on each of the loans. A property that
secures multiple loans will be more difficult to acquire in a short
sale. If there are multiple lenders, then the short sale approval
procedures for each lender must be navigated. And because
the junior loan secured by the property will generally receive
little, if anything, in a short sale, they have no incentive to act
quickly or agree to the short sale. Therefore short sales of
property that secure multiple loans can be very difficult and time
consuming to close.
Finally the buyer or, more likely, the buyer’s agent, should try to
ascertain if the listing broker has contacted the seller’s lender
so they know what information and documentation will be
required by the lender when the offer to purchase the property
is submitted. And because the list of documents and
information that the lender will require is often quite extensive, it
is also helpful to know if the seller has compiled the list.
Return to Buyer's Short Sale Considerations
Residential or Commercial Property
Buyer's Considerations
Due Diligence a Short Sale Buyer Should Undertake
Because of unique aspects of short sales, there is certain due
diligence that is unique to buyers examining potential short sale
properties and short sale listings.
The buyer evaluating a listing for a potential short sale property
must be aware of unique aspects of the listing price. With a
traditional sale, the seller sets the listing price and the seller
decides which offer they will accept therefore the listing price in
a traditional real estate sale is somewhat tied to the ultimate
sales price. The listing price of a short sale property is also set
by the seller but it is the lender who will ultimately determine if
the offer from the buyer is acceptable. The lender may not
even know the list price when it is evaluating a seller and offer
to purchase the property in a short sale. Also the seller of short
sale property does not have any incentive to obtain the highest
possible price because the seller will not be receiving any of the
short sale proceeds, all of the proceeds will be going to the
lender. Therefore short sale sellers will sometimes price
property at low prices to get numerous offers in quickly to
hopefully sell the property quickly. But ultimately the lender
determines what will be an acceptable price and therefore the
listing price, which is set by the seller, is rather speculative in
nature and may have little bearing on the final sales price.
The comparable sales that the buyer examines when evaluating
the listing price on a potential short sale property should be
other short sales that have closed. Short sales are generally
priced somewhat below market value. Therefore to properly
evaluate a listing price on a potential short sale property, the
buyer needs truly comparable sales data. If sales prices
specifically related to short sales are not available then sales
prices of comparable, non-short sale properties can be utilized
but such prices should be somewhat discounted to account for
the short sale.
When evaluating a potential short sale property, the buyer
should research how many loans are secured by the property
and how much is owed on each of the loans. A property that
secures multiple loans will be more difficult to acquire in a short
sale. If there are multiple lenders, then the short sale approval
procedures for each lender must be navigated. And because
the junior loan secured by the property will generally receive
little, if anything, in a short sale, they have no incentive to act
quickly or agree to the short sale. Therefore short sales of
property that secure multiple loans can be very difficult and time
consuming to close.
Finally the buyer or, more likely, the buyer’s agent, should try to
ascertain if the listing broker has contacted the seller’s lender
so they know what information and documentation will be
required by the lender when the offer to purchase the property
is submitted. And because the list of documents and
information that the lender will require is often quite extensive, it
is also helpful to know if the seller has compiled the list.
Return to Buyer's Short Sale Considerations
Law Office of
Craig W. Little, P.A.