When a house is being sold as a “short sale” is the listing price negotiable or is it a firm price set by the bank?

The only thing for sure about a “short sale” is that the mortgage or mortgages on the property are greater than the value of the property. The expression “short sale” is derived from the fact that there is not enough money to pay off the existing liens so the owners are coming up short of what they need in order to pay off their liens. There is no set pattern on short sales. Very often the owner will place the property for sale with a broker knowing that they will not be able to get enough money to pay off their mortgage but they are hopeful that their lender will take what they can get and discharge the mortgage. The important thing for you to find out if it is a short sale situation is whether or not the lender on the property has agreed to the short sale price. Very often the lender or lenders are approached after an offer has been made and the process of getting an answer could take quite some period of time with no guarantee that the bank will agree to any number proposed. From your perspective you should offer whatever you think is a fair price for the property irrespective of whether or not it is a short sale. The only thing that you should expect is that the process will take a long time as compared to a normal purchase so if you are under pressure to buy this may not be the right cup of tea for you. The owner is hopeful that the short sale will result in the lender  taking the proceeds of sale and release the owner from liability, but that is not always the case. Even if the lender agrees to do the short sale, the lender may insist upon a promissory note or an agreement for judgment for the amount that the proceeds come up short of the payoff amount on the loan. If there is a second mortgagee there is a second negotiation because the second mortgagee may not agree to release its position unless it  receives some funds as a result of the sale. If the owner and the broker have done their homework, all of these arrangements will have been worked out ahead of time. So you should make inquiry of the broker before you spend much time in pursuing the property. You would probably be better off looking at a bank owned property where the bank will be anxious to sell it as quickly as it can.
 

If you have questions about this or any other legal matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.

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