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Short sales in Reston. What are they?

November 16, 2009

Lake Anne. Reston VA . In early spring.

What is a short sale?

Jim: What does it mean when I see the words “short sale” or “3rd party approval required” in the remarks section of the listings you’ve  sent me for Herndon and Reston ?

Steve: Jim this is a long post about short sales. A  short sale is the attempt by the home owner to sell the home for

another short sale buyer

another short sale buyer

less than he owes on his mortgage. It has nothing to do specifically with Reston or Herndon.  Unfortunately, short sales have become a common occurrence in the last 2 years as prices have fallen from their peak in 2005. For example in many areas a home that sold for $500k in 2005 will now bring only $425k at current market prices…if the seller had 100% financing or close to it…he will not be able to pay the full amount he owes the mortgage company should he sell at $425k. If the seller netted $390k after his sales expenses he would be “short” $110k on what he owes on the home if his mortgage is $500k; hence the name “short sale”. “3rd party approval required” is wording which also signals a short sale. It means that in order for the sale to take place, a 3rd party (the lender) must approve the terms of the loan….the seller has no authority to sell his home for less than he owes since he does not hold clear title to his home until any mortgages or liens on the property are paid off.

Unless the sale has been approved by the bank at the price advertised in the listing, the odds of that home selling at that price are close to zero.

Martha's Short Sale Offer was Lost by the Bank AGAIN

Martha's Short Sale Offer was Lost by the Bank AGAIN

Attempt to avoid foreclosure

In a short sale situation the listing agent for the seller is attempting to get the bank to let the seller off the hook (not foreclose) by accepting an amount that is short of full repayment. If you put in an offer to purchase a short sale, there is no guarantee that you will even get a response from the bank since in most cases they are not even aware of the seller’s attempt to do this. In many cases, the listing agent takes the listing in order to collect some offers to forward to the bank in the hopes that the bank will agree to accept one of them. If a buyer is in no hurry…making an offer on a short sale is OK. We recommend that clients who need a home in a particular time frame avoid them.

For example:

We recently had an offer in on a short sale for more than 90 days with no response from the bank. All of this because the bank had never authorized the sale in the first place. Our client understood the situation, but wanted to make an offer anyway to see what might happen. Nothing happened. If one of our clients is interested in pursuing a particular short sale, my first question to the listing agent is “has the bank approved this price?” My second question is “how many payments behind are the owners?” If the agent doesn’t know the answers or if the seller is only a couple of payments behind, there is almost no chance that a short sale will ever work out to the benefit of one of our clients.

Unless the owners can bring their mortgages current or sell at a price acceptable to the bank, they will go to

Short Sale Buyers need patience

Short Sale Buyers need patience

foreclosure sale on the court house steps. Since most of these homes have no equity in them, the only bidder will be the bank holding the mortgage. Their bid will be the amount that is owed on the home. These homes then fall into the category of “bank owned” properties also known as REO properties, which stands for Real Estate Owned in industry language.

Short sale buyer

Short sale buyer

Bank Owned or Foreclosed Homes

Attempting to buy a Bank owned property is much more straight forward…the foreclosure has already taken place, the original owner is out of the picture and the bank lists the home with a realtor at a price that they WILL  accept.

A huge number of the homes currently for sale in Prince William and Loudoun counties right now are distress sales of one kind or another. They can also be found in smaller numbers in Reston, Herndon, Fairfax and the inner suburbs.

In conclusion, unless a particular home is our client’s dream of a life time and they are in no particular hurry, we encourage them to pursue bank-owned homes or normal human-owned homes. Unless the LISTING AGENT for the seller who is in trouble is well trained, the likelihood is that there is only an 18% chance(nationwide average) of that home going to a successful settlement. What usually happens is that the property will go to foreclosure and re-emerge in 90-120 days as a bank owned (Reo) foreclosed home.


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Reston homes for sale, Reston Real estate agent, Homes for sale in Reston, Reston Realtor


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