A few (okay moderate amount of) words on Short Sales

We are purchasing this property as a Short Sale.  It has been an exercise in patience, but I thought I'd take a moment to explain what exactly a Short Sale is and for inquiring minds, share with you our experience.

A Short Sale is a real estate transaction in which the sale falls short of the balance owed on the property's loan.  It occurs when the owner is in default on their mortgage, but the lender decides that selling the property at a moderate loss is better than going after the owner via legal action and foreclosure, which involves hefty fees for the bank and transfers the property to the bank's hands.  It avoids the property going derelict while the bank goes through the long process of selling the property (for potentially much less than a Short Sale price) and absorbing all the costs associated with that.

The market is flooded with transactions like these due to the credit crisis.  It's an unfortunate situation, but still more desirable than foreclosure for both the owners and the bank.  It has been a bit of a drawn out process, though nothing in comparison to the experience a cousin of mine has had in California.  I'm not sure if the timeline we've experienced is representative of the market as a whole, but here are the dates and particulars of our purchase so far.

We looked at the house on Valentine's Day - aren't we adorable? - and put in an offer on February 15.  In order to do so, we needed to be pre-approved for the purchase price and provide proof to the bank that we were not a financial risk.  At that point, we were informed that there was an offer already in and working its way through approvals, but we could serve as a back-up if that offer wasn't accepted.  Well, great.  We were told that offer had been put in at the beginning of February and was working through approval.  In late March, we still hadn't heard anything, but we learned the other buyers had walked due to the process taking so long, but that offer and # (we didn't know what it was) was continuing to move through the approval process.  On March 31, the original offer was accepted (less than ours!) and we stepped in to the buyers role.  At that point, both the seller and the bank had to approve our offer, which they did.  Per the terms of the Short Sale, we now have 30 days to close.  It was an agonizing wait, especially since we loved the house so much we couldn't really bring ourselves to look at other houses and risked missing the tax credit (which runs out April 30).

It's been a lot of hurry-up and wait.  We are under tight deadlines from the banks and lenders, but those same people (institutions?) pay no attention to their own self-imposed deadlines.  I'm still hesitant to call it a done deal (and why right now I think I am blogging to an audience of two), but as our realtor and friend Mike told us a few days ago, we are running out of excuses and reasons for it not to go through.  Bring it on, I say.  :)