Short Sales: The Good, the Bad, and the Ugly

For the investor who knows how to navigate them, short sales can be a great way to get incredible deals on property. But, as with all good opportunities, there are risks and caveats. You should know both the Pro’s and the Con’s of short sales before getting involved in one.

Let’s start with what’s good. There has never been a better short sale market than right now—which is to say, the housing market in general has become so bad that the more desperate and distressed housing market has soared. That means there are plenty of opportunities for buyers, and many estimates show the number of short sales going on the market this year will be measured in millions, not thousands.

And there is money in short sales, whether it’s a realtor’s commission or a big potential profit for the investor. And you can make a career of short sales. It is a NAR-certified profession (SFR—short sale and foreclosure resource).

There is not too much bad baggage to deal with on short sales, but there’s enough that it’s worth mentioning. First of all, it’s a very slow process. Even though the seller is desperate and buyers never want to wait, it generally takes months to get bank approval, and even that comes with its own bundle of tedious, time-consuming paperwork. It is not—as many believe—a zip-in, zip-out purchase.

The second drawback is the people you will deal with and the image you will represent. Although in many cases the seller will be grateful for your having saved them from foreclosure, sometimes the buyer is perceived as some rich businessman here to profit from the misfortune of others. Just take it on the chin and proceed, if you can, but understand that it’s a real possibility.

The final thing I want to mention in the Con’s section is the complexity of the short sale—it requires a thorough understanding of the standards and process in order to be successful and profitable. In moments of desperation, people are capable of some pretty unethical behavior. Make sure you understand what’s allowed and what’s required, so that you can avoid getting hung out to dry.

Short sales are abundant, and they bear the potential for real profits. But in order to be successful buying a short sale, you must understand the process in-and-out, you must be patient, and you should be willing and ready to absorb some resentment from the seller. Do your research, and good luck!