Before the economy changed in 2008 not many had heard of a Short Sale, and even fewer had known of anyone who bought or sold with this type of transaction. Short sales became the norm when the subprime mortgages began to reset and home values began to drop, leaving about a quarter of American homeowners “upside down,” or owing more on their homes than the homes are worth.

Today I field questions from my buyers as to why the banks have the right to come back and ask for additional funds in order to purchase a property after we have a signed purchase agreement from both parties.

I have to answer “The seller’s bank absolutely does have the right to change the terms of your transaction, even though you have a contract signed by both buyer and seller, and even if you’re a month, two months or six months into the transaction.

Because the banks are not recouping enough from the sale to pay off the mortgage lenders, all lenders with an interest in the house must give their permission for the transaction to close. And many will not do so unless they can get just a little bit more from the deal.

I will always recommend offering $5,000 to $10,000 below market value because as a buyer you will have to make the simple decision on whether you’d still want the house at the cost of $5,000 to $10,000 more, or not. And if your already $5k to $10K below market value that decision is a lot easier.

A San Jose buyer’s agent like myself is skilled at managing buyers’ understanding and expectations of short sales. So try and make sure you run through all the scenarios with your Realtor and know that the banks will most always ask for additional funds to get the Short Sale deal closed.