Weighing the pros and cons of real estate short sales
The first option hits your credit score hard, making it difficult to obtain loans in the future. The second allows homeowners to sell their property at a price below what they owe the lender and recoup some of their losses.
Banks like short sales because they don’t have to spend money to maintain the property, which will usually sell for more than a foreclosure.
In many markets, including Chicago, short sales are becoming the norm. Local @properties agent Mabel Guzman says short sales account for 20 percent of her business. “It's what's in the market," she said, "although some [agents] would rather not deal with them."
For all parties, the main downside is that short sales are a pain in the butt. WBEZ’s Susie An and Ashley Gross chronicled An's own mixed experiences with short sales last year. An and husband got their house, but many other potential buyers end their search with the deal falling through, after months of headaches.
Real estate agents often use attorneys to expedite the process. Guzman, a former head of the Chicago Association of Realtors, uses a third-party negotiator to assist clients interested in a short sale.
Dennis Rodkin, who writes the Chicago magazine Deal Estate column and blog, says many are turned off by the cumbersome process. “For potential buyers on a lease, short sales can be too risky,” he said. “People can end up temporarily homeless.”
Starting in June, federal regulators will begin to remove some of the hurdles by requiring lenders to respond to seller requests in 30 days and have an answer within 60 days.
Rodkin and Guzman join Eight Forty-Eight on Tuesday to discuss the changes and whether short sales are worth the pain. If you have an experience with a short sale, call in live at 312.923.9239, to share your story.