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New Construction Condo Experience
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Trying To Buy A House From A Difficult Seller
I Am Now A Homeowner
Unexpected Homeownership Expenses

Welcome to my personal story all about my home buying journey. The journey started with several years of saving money for my house down payment. After that, I spent many long months in the home buying process. Last time, I talked all about my experience trying to buy a new construction condo. That did not work out, but at least I learned valuable lessons. Today I will talk about my experience trying to buy a short sale condo. This experience was very difficult and also did not work out. The following article's bias is definitely for first time home buyers to avoid short sales. They are just too difficult, with a very long wait. However, I am only speaking from my own experience. I must say that if you are a real estate expert or are buying a second home, short sales may be right for you. There certainly are great deals available for the expert.

What Is A Short Sale?

There's a lot of press out there about foreclosures and short sales. What exactly is a short sale? (This is a very good question, one that can be quite confusing.) Here's my attempt. A short sale is a situation where someone bought a home and they are trying to sell it for less than the amount of money they owe on their mortgage loan. A few years ago, it was not uncommon for someone to put no money down (or very little) and buy a home. (As a side note, I would never recommend doing this. The point of this website is to encourage delayed gratification and to save up your down payment over the years and only buy when you have 20 percent to put down.) As you may know, real estate prices have trended down over the last several years. Consequently, these people who took out 0 down loans actually owe more money on their property than it's worth! Moreover, many of them have adjustable rate mortgages and their mortgage payments are skyrocketing. (Another side note: I strongly consider going with a 30 year fixed rate mortgage, you will be able to sleep so much better at night knowing your rate is fixed.)

So we have a climate where people owe more on their home than it's worth, their mortgage payments are way up, and moreover they may be facing financial hardship because the economy is terrible right now. These same people may be in even worse trouble a few months down the road if they do not sell, they could face foreclosure. The solution is a short sale. When short sales happen, the seller tries to sell it at or below current market value to get rid of the property. They will not walk away with any money and the bank will have to take a loss. The benefit? Short sales do not affect your credit (unlike foreclosures) so the seller can one day buy a house again and the lender does not have a complete loss. They take some loss but mitigate a potentially larger loss. It all sounds like a "win-win" situation, right? It gets complicated. Read on...

We Found The Perfect Property

I keep saying my story ends well and it does! Let me give you a preview: There are two condo complexes in our area that we love. We wanted to end up in one of them. While the short sale does not work out for us, we actually purchased a larger unit in the same complex and live there now! Anyways, let's rewind a bit... My fiancee and I found a great condo. It was beautiful but was a short sale. We had a great real estate agent who had worked with the seller's agent before so we felt good that we could do it. If we had a less experienced agent, we probably would have skipped the whole thing. After we found the perfect property, our real estate agent talked to the seller's agent and found that there was one offer on the table, but it was very low. Our agent suggested the price we felt comfortable offering and the seller's agent said that he thought we would get it. Things were moving in a good direction.

We Placed An Offer On the Short Sale (And Then Waited Forever)

So we placed our offer on the short sale. Based on what the seller's agent told our agent, we believed our offer was $25,000 to $50,000 higher than the low ball offer from the other person. We still felt like we were getting a good deal, but not a steal. Overall, we were looking to pay a fair price for a place that we wanted to live in forever. We felt even better because the seller's agent told our agent that he would let us know immediately if the other person raised their offer so we would have the chance to counter. At this point, we started waiting. We got a few inspections done on the property (termite and general inspection) but other than that just had to wait and dream for two months straight. Short sales are slow and require a lot of patience. The bank carrying the original loan needs to sign off on it and that can take quite some time (one to three months is typical) because there are a lot of short sales right now.

We Kept Getting Updates From The Seller's Agent

The seller's agent kept giving our real estate agent updates. The bank had done their appraisal. The bank had given an ETA. The bank had approved it and passed it along to the underwriter. Then, the seller's agent went silent. Our real estate agent kept calling him but he would not pick up the phone. After trying for a few days, our agent had a great idea: Call him at night from another phone he did not recognize. He finally picked up and said the bank is in the 11th hour of making their decision.

We Lost Out and Did Not Get This House

At this point, we knew something was wrong and that the seller and his agent were doing shady business. Our agent immediately contacted the bank herself. We said we were prepared to counter at a higher price. It was too late! The person who ended up with the property outbid us by $1,000. The seller's agent lied to us, avoided our calls, and told the other party our price so they could outbid us by $1,000. Overall, we were very discouraged and almost gave up on the home buying experience altogether. What a waste of time!

At this point, our real estate agent escalated the problem to her boss. Her boss talked to the boss of the seller's agent. The talks did not yield any results. Our agent said that we could contact the real estate board and/or local news channels to deal with the incident. We may still do this, but honestly life is short (no pun intended) and who has the time (especially now that we're in our new home).

My Advice To You - Be Extremely Careful With Short Sales

You have worked hard to save up your down payment. It's a bad real estate market. You deserve to make all the shots. I have hinted at this before but most repeat it: The real estate industry is full of bad people (and good people too). These bad people will not hesitate to take advantage of you. I work in technology and am thankful everyday that I do not make a career in real estate. Until I tried to buy my first home, I never knew there were so many shady people. It's a rough market now and banks are overloaded. This allows people to get away with shady stuff. I personally think short sales are an arena where this is happening. If you stay away, you will be avoiding a lot of risk, waiting, and stress. I must caveat all of this again that there is a time and place to go after short sales. If you know a lot about real estate and business in general and are not a first time buyer, there are definitely deals in short sales. I just don't recommend it for the first time buyer like myself. Moreover, I must say that there are many good people in real estate. It's just that you have a few bad experiences and the bad people really stand out in your memory, how unfortunate.

Another way of looking at this whole experience: We wasted a ton of time but are now in a bigger and better unit in the same complex as the short sale (actually a different building which is great so we don't have to see those people). Things happen for a reason and our cards turned out better because we lost out on this house. At the same time, we paid for an appraisal, termite inspection, and regular inspection and never got this money back. That's a lot of very hard earned money down the drain. I hope our difficult short sale experience will help you avoid some of the same stress. A closing thought: I told you we now have a great unit. Don't give up and hang in there! Things will work out for the best if you have determination (and a lot of it!). Don't want to discourage you from the dream of homeownership because it's a great thing that you definitely deserve. Also, don't want to discourage you from short sales if you have your heart set. What if your only option is buying a short sale because the prices are so great? Well, go for it! Just be extra cautious and make sure to have a great real estate agent you trust a lot.

Want to learn more about my home buying journey? Make sure to check out our third attempt at buying a condo that failed because the appraisal came back with significantly less square footage than the seller reported. Make sure to get an appraisal before removing contingencies on your offer, it could save you thousands.