Over the last year or so, Billy and I have had the opportunity to work on a fair number of short sale transactions. Short sales are where the seller owes more to the property’s lien holders than its current market value. Offers need to be approved by the lien holders. One of the challenges of working with short sales is setting expectations on what to expect from the banks. To be honest, bank behavior depends on the banks involved, the number of mortgages and a whole lot of other factors. That makes it hard to come up with a “typical” short sale process. That being said, here are some observations that we have based on our experiences.
- The time frame for bank responses varies pretty widely. It appears that smaller banks tend to process short sale offers faster than larger banks. While the big banks have made improvements in their processes and efficiency, they are still overwhelmed by the volume of short sale transactions.
- A Broker Price Opinion is where a bank will hire local real estate professionals to give their opinion on the value of a property. It sounds easy enough, but assigning value in this market can be challenging. The reduced volume of transactions means fewer comparable sales are available to estimate value. Maui is already a tough market to assign value when you get outside of subdivisions as land values, construction types and materials vary considerably. This means the results of BPO’s can sometimes be a surprise.
- Banks rely heavily on Broker Price Opinions (BPOs) when determining their sales price. Most banks won’t consider offers that are well off of the BPO. A high BPO tends to lower the odds of a successful transaction while a low BPO tends to raise the possibility of a successful sale.
- After a bank approves a short sale, the buyer will have a limited time frame to close. Typically, the banks are giving 30 days from approval. If you are using financing on a short sale transaction, buyers will need to be working on their loan approval prior to bank acceptance.
The number of short sales being approved is increasing. That being said, buyer’s pursuing short sales require some measure of emotional detachment. The length of time associated with short sales and the success rate of short sale offers can be frustrating. There are no guarantees when it comes to short sales. There are however some beautiful short sale properties available on the market. Contact us today you need assistance in purchasing a short sale property on Maui.