I often get asked, “What exactly does ‘short sale contingent’ mean in MLS?” Great question.

First of all, let’s start with answering the question of what a short sale is. A short sale is where a homeowner is under water in their loan(s), or in other words, their loan(s) total MORE than what their home is currently worth. This homeowner is attempting to sell their home at a LOSS to the bank. For this short sale to be accepted, it is completely up to the bank as to whether or not they will agree to accept the loss and sell the home.

One of the main qualifiers of an approved short sale is that the homeowner must have a valid hardship. A valid hardship would be something tangible that affected the homeowners’ income. It could be a job loss, an expensive medical issue, a death, a divorce, or something along these lines that the bank would approve as a valid reason why the homeowner could no longer pay their mortgage anymore. I can see you thinking right now….but so and so did a short sale and they didn’t have any of those reasons! Yes, everyone knows someone who had their short sale approved and didn’t have a hardship, but my response would be that this is a rare situation, and/or perhaps you are unaware of a hardship that exists for the seller. Many of these reasons are very personal.

Now, what is a home that is short sale contingent? This is a home that is attempting a short sale that was listed in MLS and now has an offer on it. This offer has been accepted by the seller – ie, the homeowner – and has been submitted to the bank for acceptance. Since the bank is taking a loss on the property, it is up to the bank to accept the offer in the end. This is limbo land. This is an unknown period of time where the bank is reviewing the seller’s short sale package, determining market value, negotiating with any second or third loans on the property, and determining their decision. This process may be as short as a few weeks, to several months, with an average time being 90 days or so.

During this time period, the listing agent of the short sale will likely only submit one offer to the bank, however, the bank may have specifically requested to see ALL offers on the home. If you are interested in a short sale contingent property, have your agent call the listing agent of the property and check in on the status of the home. Have your agent ask the listing agent if the offer looks solid, or if the buyer looks like he/she may walk. Ask for your offer to be put in “back up” position in case the first offer walks. Buyers walk for all sorts of reasons – such as not wanting to wait any longer, not agreeing to a bank’s counter offer, not being able to obtain financing, or not liking inspection results. It’s not always a horrible thing to be put in back up position…you can keep looking for other homes while having a home you like in your back pocket.

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