Truths about short sales.

Short sales. Those are homes listed for less than the seller owes on the mortgage that require approval from the lender. Sellers who can't make their mortgage payments, or some who can, but who want to cut their losses, pursue the short sale to get out of their mortgage.

Because the mark and penalties left on a borrower's credit is slightly less than a traditional foreclosure, the option to sell at a loss is becoming popular in this
market, where many homebuyers who purchased or refinanced since 2002 find themselves owing more than the price the current market will support.

The problem with short sales is that though the prices on many short sales appear alluringly low, the waiting game deters buyer after buyer. The buyers wait as banks turn down offer after offer.

Short sales took a median 106 days to sell in that eight-month period, versus the 67 days non-short sales (including bank-owned foreclosures) spent on the market.  A desperate would-be short seller could list a house for 30 percent below the comparable properties, but the combination of red tape, overwhelmed and understaffed loss mitigation departments at the lenders, and misconceptions about what's needed to get the sale approved means the house doesn't sell fast.

In some cases, banks are asking sellers to prove their financial hardship with tax returns and to promise to pay back the difference even after they've left the house.  And there's always the chance that while a real estate agent is negotiating a short sale with the bank, another branch of the bank is working to repossess it, sending it to auction and selling it out from under that agent.

From the street, a short sale looks like any other house for sale with a sign in front advertising an asking price and a phone number for a real estate agent. But on the other side of the front door, a number of issues might slow down the transaction: the seller's financial situation, the number of mortgages on the property (and the number of lenders with which to negotiate) and how many payments the owner has missed.

It all makes for a long process. By the end, sellers might have seen several offers come and go as buyers grow impatient with the slow pace. Sellers' agents are given a variety of hats to wear, from screener of offers to negotiator with lenders, which requires maneuvering the complicated phone hierarchies at the bank. And often, the process takes so long that the house ends up going to foreclosure anyway.

There is an argument for buying a short sale; buying at a lower price and a good opportunity.  But buyers must also be informed about details that may make the purchase not a best match due to the buyer's personal situatuion.