Distressed sales are becoming the norm around here - including both true Foreclosures (bank owned properties) and short sales. As a buyer, the more difficult of the two to get a handle on (and actually purchase) is the Short Sale. These listings are fairly common - and they are generally well priced homes that the sale price will be less than what the owner owes on the house.
For instance, in 2006 a homeowner paid 500k for a house and put 100k down - so their loan amount is 400k. As the market slid downhill, now the property is only worth 350k and the homeowner is "upside down" in the house. This simply means that they owe more than the house is worth. So they decide to put it on the market for $349k and a buyer offers them $340k. The sellers accept immediately and then it's up to the bank to approve the sale price (and take less than what they're owed). The seller needs to convince the bank that they're in dire straits - and need to provide lots of documentation to show that they're in trouble. Typically, they'll need to show 2 months pay stubs, 2 months bank statements, 2 years income taxes, a detailed financial worksheet, and a "Hardship Letter" which explains their particular circumstances.
After turning in their offer on the home - the buyers are forced to wait for bank approval. This phase is extremely tedious because it requires patience... and plenty of it. It can take anywhere from a month to a year - depending on the bank, the loan amount, the seller, the circumstances, and the agent (agents really need to be experienced and know what they're doing to make these transactions work!). Unfortunately, you won't hear much in the way of progress at all - and that can be extremely disheartening. When you do finallly get the go-ahead, you'll only have 30 days to do your inspections and close the escrow to buy the house. As you wait, you'll see other good deals come and go - and often times, buyers get tired of the process and end up buying another home. If you're not in a hurry - Sedona short sales can be a great deal - but if you're a type A personality - be prepared!
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