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Curbed U: Short Sales Suck, But Not as Much as They Used To

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Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a house or apartment. Additional questions welcomed to la@curbed.com.

In the deepest valley of the housing market collapse, short sales used to litter the landscape. They're much less common now, but with so many homeowners still underwater, they still pop up, so it's worth knowing what they are. Short sales occur when a homeowner owes more on his/her mortgage than a property is worth, and can no longer make payments. Rather than foreclose on the property, the lien-holders agree to allow the home to be sold for a reduced price and to take a loss on the transaction. So, the sellers get released from their debt obligation while avoiding a credit-ruining foreclosure; the lien-holders get to recoup at least some of their losses; the buyers pick up a bargain; and everything's hunky-dory. So why do short sales make some buyers run far in the other direction?

Because typically, mortgages on such properties are divided up between multiple lien-holders, and each bank or lender must approve every short sale offer, counteroffer, concession, etc. This process can drag on for months, with the distinct possibility of the sale falling through at any time for just about any reason. Oh, and even if your offer is accepted, the banks will usually require you to buy the home as-is and won't pay for any repairs.

But short sales in 2013 are not quite so maddening as they were in the immediate post-bubble years. A broker we spoke with recently said that banks are treating short sales much like standard sales these days. There are still hoops to jump through, but the process is moving along much more quickly. And now there's even the possibility that what starts as a short sale winds up as a standard sale, as happened with this house in Los Feliz.
· Curbed University [Curbed LA]