Agents hate ’em. Buyers get frustrated. Sellers get angry, scared, and ultimately, resigned. But for many price levels (especially entry level), short pays make up much of the available inventory these days and everyone is learning how to deal with them. So – what’s the deal with short pays? Why all this angst?

Short pays are simply homes listed for sale that have more debt than the property is worth (ie, a home on the market for $400k may have $500k worth of debt). Technically, the homeowner still owns the home, but in reality it’s the lender calling the shots because the lender has to take a substantial hit in order for the home to sell.

Why all this angst? It’s simply because all the lenders are swamped and can’t handle this tsunami wave caused initially by the sub-prime mess. They don’t (or chosen not to) have the people, systems, etc, in place to deal with this new phenomenon. Thus it’s not unusual to have to wait 60 – 90 days before the lender even LOOKS at your offer.

Then the lender may not accept it. If you’re the buyer, you’re bummed, but move on. But if you’re the seller, you’re really bummed because your home may be in foreclosure (or soon to be if you’ve stopped making payments) and the angst of not knowing what’s going on raises the stress level several notches.

For listing agents, several offers sometimes come and go because buyers see another property they make an offer on (or several) then drop out from your property. What’s really frustrating is when an offer is finally accepted by the lender, but the buyer backs out, and all the previous offers are long gone. So you start marketing the property all over again.

Another thing. As a buyer, understand other buyers can show up at anytime and submit a better offer than yours.

Morals of the story:

1. Most agents hate short pays. Some agents don’t even show their clients short pay listings because of these issues.
2. As a buyer, if you do look at a short pay listing, find out:
   • Are there offers on the property? How many?
   • How long have they been sitting with the lender?
   • Has a negotiator been assigned yet? What feedback has the negotiator given?

Above all – have patience! Everyone else is going crazy too!