Short Sales listings have been increasing in frequency. What is a Short Sale? According to the Hawaii Association of Realtors a short sale is defined as “a sale where: (1) the liens of a property combined with the associated costs will exceed the purchase price of the property and (2) the seller will be asking the lien holder for a release of the lien on the subject property without a complete payoff.”
The seller does not necessarily have to be late on payments. They can be fully up to date. If a seller is at risk of foreclosure, delinquent in their payments, has a lien for nonpayment or is at risk of a lien, this is defined by the State of Hawaii as being a distressed property. It is worth reiterating that short sales and distressed properties are not mutually exclusive. You can be a short sale without being distressed. You may also be a distressed property without necessarily being a short sale.
What does this all mean for buyers and sellers?
For sellers, you need to be aware that a short sale may have legal, cash, credit and tax consequences. Prior to listing your property, you should talk to a qualified Hawaii attorney and/or a CPA. Once your property is listed, it will be the responsibility of the owner/seller to communicate with the banks. You may get some assistance from a title and escrow company when you accept an offer. Your real estate agent will not be able to talk to or negotiate with the bank. The process of working with the bank can be lengthy.
For buyers interested in short sale properties, this can be a lengthy process. Bank response times on offers vary widely. Some banks have become more efficient and can respond within a month. Other banks may take 6 months or more to respond. There are no guarantees that a bank will accept an offer either. You may receive a counter from the bank or in some cases an outright rejection. Sellers may submit multiple offers to the bank so it is possible that other buyers may trump your offer. The good news is that you can structure your contract so that you have no real obligation to purchase the property prior to the bank’s acceptance. Even then, you are still likely to have contingency periods for inspection.
There are some well priced short sale listings on the market, so the process and the uncertainty should not necessarily be a deterrent. If you have additional questions on short sales and distressed properties, feel free to contact me for further clarification.
2009 First Quarter Sales Recap
This month’s Maui Real Estate Report recaps the first quarter of 2009 sales activity for Maui:
• The first quarter of 2009 showed single-family home sales down to 114 sales from 228 sales compared to the same period last year. Condominium sales were down to 149 sales compared to 275 last year.
• First Quarter 2009 median sale prices are down overall for the island of Maui with single-family prices down 10.6% and condominium prices down 20.3% compared to the first quarter of 2008 .
• Percent change numbers may not reflect the actual values of a neighborhood due to a small number of sales in some areas. For example, the Wailea area had three sales in the past three months, however one of these sales was around $7 million dollars which affects the overall numbers.
• There is no better time than NOW for First Time Homebuyers to take the plunge.