Buying a Short Sale? Caveat Emptor
I ran into an old acquaintance recently (someone who I hadn’t seen for a number of years), and she was bringing me up to date on the goings on in her life. Some unfortunate things had happened to her, but she also told me how happy she was to be purchasing a short sale in near the beach in our fair state. She then went on to tell me how excited she was to be almost done with the transaction. Of course, she also complained that the transaction had been a little bit stressful.
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Since I know and love short sales, I was curious as to what had gone wrong. I was thrilled to hear that she got her short sale lien holder approval in less than three months. But, what unfolded next did not surprise me.
She learned shortly after receiving short sale approval that the property had three additional liens: 1) a child support lien; 2) a credit union lien; and 3) an abstract of judgment. The transaction cannot close with these liens in place. So, each and every item must be reconveyed (which sometimes requires a little bit of money).
I am a huge advocate of listing and selling short sales. One vital part of the process is ordering a title report shortly after taking the listing. A second important part of the process is having title run a Statement of Information on the sellers very early in the process. Had the listing agent involved in this particular transaction done both of those things when she took the listing, then everyone would not have been surprised about those liens at the very last minute. The three months between submission and short sale approval could have been used to make a plan to pay these liens (or to decide to purchase another property).
If you are a buyer who is buying a short sale, demand that the Statement of Information and the title report be ordered early in the process. If the sale is not going to be viable, you probably want to know now . . . and not three months into the transaction.
Photo: flickr creative commons trawin