Expert: Lori Frankfort - 2/7/2010

Question
Hi Lori, thank you for what you do. My wife and I are pre-approved for up to $450,000 by one of the largest banks. But we want to spend only up to $400,000. We found many listings on the web and we like them. We are working with a Realtor but she's been moving so slow. So we kinda do it our own for now (searching homes) Most of the properties we are very interested in, are "Short Sale" status. We have heard that Short Sales are very complicated. Should we still pursue these houses? What's so complicated about it? We are very excited but sometimes heart broken. How does this "Short Sale" thing works? What are the criteria, steps, expections towards short sale? What is "Under Contract" status means on a listing? What is "Back Up Offer Accepted" means? Again, thank you for what you do and we hope to hear from you soon. Sincerely, Cliff.

Answer
Hi Cliff.

A short sale is when the owner of a home cannot afford to make payments anymore, and are trying to avoid a foreclosure.  They contact the lender and request that they agree to allow the homeowner to sell their home for LESS than what they owe on the house.  For example, if a home was purchased for $600,000 and now it's worth $450,000, they ask the lender to accept $450,000 and allow them to sell their home for that amount.  If the lender does not agree, the homeowner cannot sell it.  That's what makes short sales so difficult, the process of getting approval to sell the home for less than what they owe can take a very long time (sometimes up to a year!) and there's no guarantee they will agree.  This "permission" isn't usually requested until someone like you agrees to buy the home for a certain amount - then they call the lender.

"Under Contract" means that a house is in the escrow process but the sale has not closed yet.

"Back Up Offer Accepted" means that the house is in escrow but the Buyer is still in the process of completing their inspections, and that Buyer still has the opportunity to back-out of the purchase.  If that happens, the Buyer waiting in the wings is given the opportunity to jump-in and buy it.

Good luck,

Lori Frankfort
Broker Associate
Keller Williams Studio City