Tuesday, October 30, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part II)

Rule #2- Understand That Sellers May Need To Pay The Difference

Link back to Part I

Many short sale transactions go along smoothly and then come to a screeching halt a few days before the scheduled close of escrow. One of the most common problems is that the seller refuses to sign a promisary note to pay back all or some of the debt at some point in the future. Without this note, the bank does not approve the sale and instead decides to continue with foreclosure proceedings leaving the buyer with nothing more than a blank stare.

Why would the seller not sign this note? There are a few reasons but the most common is that they just don't care enough about their credit rating to try and salvage it from the devastation that foreclosure will cause. It is a shame, but in some instances the seller may just be better off walking away from the property. This is one of the areas where a competent real estate agent can help you put together a realistic expectation for the likely success of the subject transaction based on the mindset and financials of the seller.

Can you do anything to get them to sign it? Other than attempt to convince them that it really is in their best interest, the real answer is "No." Of course it would be best to negotiate a deal ahead of time where a promisary note is not necessary for sale but this will not only affect the sales price, but will also be impossible in many instances.

Pre-Foreclosure home buyers need to understand that the success of closing on their new home may rely on some factors beyond their control. For this reason, they need to be careful when negotiating the transaction and exercise a degree of patience and flexibility throughout the process.

Link to Part III