Once considered a relic of the post-2008 housing crash, short sales are reemerging in markets across the country, and savvy real estate investors are paying attention.
Veteran short sale specialist Rebecca Ravera, founder of Ravera Home Sales & Capital Short Sale Group, has closed over 1,000 transactions during her 16-year career. She recently joined hosts Jack BeVier and Craig Fuhr on the Real Investor Radio Podcast to share insights from the front lines of Maryland’s shifting market.
According to Ravera, interest in short sales is spiking fast. “We used to get 8 to 10 short sale leads a week,” she says. “One recent week, we had over 30.” If you’re an investor wondering whether short sales are worth your time, here’s what you need to know, and why this opportunity might be worth another look.
Why Short Sales Are on the Rise Again
Several macro trends are converging:
- Post-COVID Loan Modifications Are Catching Up: Many homeowners who entered forbearance during the pandemic are discovering hidden second liens or balloon payments attached to their properties. “They had no idea they signed up for a silent second mortgage,” Ravera explains.
- Consumer Debt Is Peaking: Americans are more financially strained than they were even a year ago. With credit lines maxed out, a single roof leak or job loss can push households into default. Most of these homes require renovation and are perfect for Investors looking to increase their portfolio.
- Reverse Mortgages Are Creating Underwater Scenarios: “Honestly, I don’t think you’re supposed to ever get out of them,” Ravera jokes. The fees, interest, and accrual structures are so aggressive that borrowers are often upside down within months.
Add in regional slowdowns, markets like Sacramento, Phoenix, and parts of Florida have seen 25% to 140% year-over-year increases in short sale listings, and it’s easy to see why investor interest is growing.
How Investors Can Tap Into the Opportunity
Here’s how the process typically works:
- Agents list the short sale on the MLS. Once it meets the minimum days on market, a buyer submits an offer. That offer kicks off the short sale process, since most lenders won’t review it until they receive a ratified contract.
- The bank orders a valuation – either a BPO or an appraisal – to determine the acceptable price for the short sale.
- If the numbers align with the current offer, the bank issues a short sale approval. If not, the contract is voidable, with no risk to the investor. The property is then relisted at the approved price for another buyer.
Ravera’s team averages a 3–4-month turnaround, down from the 6–9-month slogs typical in the early 2010s. Persistence is the secret; her team contacts each mortgage company multiple times per week until files are moved forward and approvals are secured.
Myths and Misconceptions: Debunked
Let’s set the record straight:
- Do homeowners have to be late on their mortgage? Not always. It depends on the loan type. FHA and Fannie Mae, for example, do require the Seller to be behind. VA loans will sometimes allow homeowners to complete a short sale when current on the mortgage, depending on the circumstances of their situation.
- Can any real estate agent negotiate a short sale? In some states, like Maryland, agents are not allowed to negotiate short sales. Ravera and her team process the files without crossing lines of negotiations.
- Do appraisals always reflect distressed values? Not even close. “We’ve recently seen two appraisals on the same property 45 days apart, one at $425K, the other at $300K,” Ravera notes. Appraiser education of the current market and experience matter.
- Will sellers owe the difference? In many government-backed loans (FHA, Fannie Mae), deficiencies are waived; however, nothing is determined or guaranteed until the approval letter is issued, which outlines all the approved terms. Additionally, the Mortgage Forgiveness Debt Relief Act, extended through 2025, could help shield many from tax liability. It’s recommended that homeowners speak with licensed tax and legal professionals regarding any potential liabilities when participating in a short sale program.
Can Short Sales Be a Good Deal for Investors?
The short answer: it depends, but increasingly, yes.
- If the appraisal is realistic and indicative of a fair market value and the servicer is responsive, investors can land solid properties.
- Uncooperative investors can still derail deals, but the risk is minimized when experienced professionals manage the process.
Ravera cautions that smaller or private note holders tend to resist short sales more than institutional lenders. “We’ve seen them ignore professional valuations and demand higher values; some are using AVMs or even internet valuations similar to websites like Zillow or Redfin to counter official appraisals.”
What Should Investors Do Next?
If you’re seeing homeowners with NODs (Notices of Default), title red flags, or distressed listings, you could be looking at a short sale opportunity. Here’s how to act:
- Don’t go it alone. Partner with a seasoned short sale professional who understands the nuances of lender guidelines and can help the homeowner when in a potential foreclosure scenario. These homeowners need help, and they don’t always know where to start.
- Move quickly but responsibly. Make strong offers early to trigger the process, but be ready to pivot if values come back off target.
- Do your due diligence. Reverse mortgages, silent second liens, and servicer requirements can all affect outcomes. Nothing is guaranteed when it comes to a short sale.
Get Help on Your Next Potential Short Sale Deal
Whether you’re new to short sales or a seasoned investor looking to scale, Rebecca Ravera and her team offer full-service support, from document prep and lender processing to getting it across the closing table. If you are doing business in the state of Maryland, call 443-844-1446 to speak with Rebecca’s team.
Short sales require patience and precision. But in today’s shifting market, they’re also one of the last untapped treasures in real estate.
