113 Days on the market. That's a lot of days to be in "show the house at any moment" mode, especially with three young kids and two full-time working, commuting parents. Exhausting. Tiring. Annoying. But it has apparently paid off. Yesterday afternoon we received an offer! I know nothing about the potential buyers except that they looked at the house twice last week (2 of 5 showings in 7 days last week!). The offer is pretty good - not top-notch - but good, and let's face it: beggars can't be choosers, right? We counter-offered today, mainly regarding which appliances we will leave (they want all, we want to take all but the stove and the dishwasher). I'm sure we can come to an agreement, though. So now the real fun and hard work begins: getting the bank to accept the offer.
I feel like I should take a few moments to better explain the short-sale process, because through-out this journey I've learned that many people don't really understand what the term "short-sale" really means. Some people actually think it means that the home-selling process is stream-lined, or shortened, and that couldn't be farther from the truth! I'm not an attorney or real-estate agent, but this is my take on all of the reading, consulting and interviewing agents and attorneys, and other research I have done over the past few months. (Obviously, if you're looking for hard and fast, complete and legally accurate information, I should not be your source. :) Talk to a real estate attorney and/or a knowledgeable Realtor for specific information.)
A short-sale is when the seller is short on funds to close the sale because the amount for which they can sell the home is less than the amount outstanding on their mortgage or mortgages, if more than one lender, and they lack the necessary capital to pay off the balance remaining. Generally speaking, a seller has to be delinquent on their mortgage payments in order for the bank to consider a short-sale approval, and they have to have experienced a substantial change in their lives that make it difficult or impossible for them to fulfill their obligation to the bank. There are exceptions to this, of course, but they are not common. At this point we are coming up on 120 days past-due and the offer we have received is for approximately $105,000 less than our mortgage balance. Since we don't have that kind of money laying around (if we did, we'd pay the mortgage - duh!), we must submit the offer to the bank and wait for them to respond in one of the following ways:
1.) take the offer as payment in full for our debt, forgiving the balance,
2.) take the offer as partial payment for our debt, reduce the balance remaining (forgiving a portion), and allow us to sign an unsecured note for difference, or
3.) reject the offer which would require us to either secure funding elsewhere to pay off the balance, to allow the home to go into foreclosure, or continue to solicit offers on the property in the hopes that one will come in to the banks liking before they get around to foreclosing.
There is an option #4, I suppose, in that the bank can counter-offer the buyer's offer, and let the buyer decide if they will accept the new purchase price; then the process would proceed with the options above. There are a lot of things that come into play in determining which way the bank will go, such as the amount they project they'd have to pay in fees to foreclose, time the home has been on the market, the balance remaining, and the local laws concerning their options for recourse on the loan. This last point is very important for us since we live in WA, which is what is often referred to as a "non-recourse" state. What this means is that the laws fall generally in favor of the seller not having to pay the balance above what a lender is able to recover from selling the property at auction or on the market following foreclosure. What that really means for us is that if the bank will not do option #1 above when they respond to the offer, then we are better off - credit hit aside - to allow the home to go into foreclosure. Again, this is not always the case, but in general it's how it works, and it is how our attorney has advised us to proceed should the bank be unwilling to forgive the balance of the mortgage.
How long does this take, you might ask? That is the $64,000 question, and it is entirely dependent upon the bank. Our buyer has given us 90 days to get a response from the bank. If the bank does not respond in that time, they can walk away from the deal. According to the attorney with whom we've consulted, we should expect for the bank to take close to 90 days to respond, for them to lose the offer and/or supporting documents at least twice, and to never speak twice to the same person at the bank. All in all, it's a messy system at best, and many banks, especially smaller entities like ours, are simply not equipped to deal with the high volume of these types of sales the housing-market crash and recession have spurred. We're hoping for a best case scenario which would be that the bank responds favorably in about 45-60 days. The buyer, and most banks, expect to close 30 days after the bank approves an offer. On the short end of the spectrum we could be closing sometime in November or December (Happy Holidays...). It's also not uncommon for this to drag out 6, 8, 10 months if the bank really drags it out and if buyer is willing to stick around that long. Realistically, we're probably looking at closing sometime in January or February.
So thank you for your prayers and support as we've worked through the insanity of the last four months to get to this point. Keep it coming, because that was the easy part, and we need it more now than ever. We're not out of the woods yet. Now....we wait some more.
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