There’s lots of talk in the Montpelier real estate market about short sales, and, while we’ve avoided the massive problems experienced by other parts of the country, there are short sales in Montpelier.

The question I’m asked most by buyers is “What is a short sale”. 

A short sale is when a house is sold for less than the owner owes.  Think of it like this:  When it sells, someone’s coming up short.  In the case of short sales, it’s the lender who comes up short.  And that’s the potential sticking point.

See, the bank has an interest in a high sale price too, and therefore has a say in what offer(s) are accepted.

As an example, let’s say a seller owes $200,000 on a house they bought in 2007.  Those numbers could actually be fairly typical in the Montpelier real estate market.  They’ve been relocated, and have to sell.  The problem is that the house is only worth $180,000.  No buyer’s going to pay the 200k, which is ok, because no lender would finance $200,000 on a house that’s only going to appraise for the $180,000.

Who’s going to take a loss?  In a short sale, it’s the LENDER.  In the best scenario, the house sells at $180,000 and the lender only loses $20,000.  The owners don’t really lose money, but they do get a ding on their credit scores.   And that’s why the bank cares.

Since the bank has real money on the line, they get a say in the transaction.  And since they get a say, things can move REALLY SLOWLY.  I once had a deal on a short sale in Barre in which the sellers made a full price offer.  The lender couldn’t make a decision for 6 months!  My buyers rejected that.