In the past I have talked about what seller’s need to know in order to successfully navigate a Short Sale. Now, let’s talk about the Short Sale Secrets that buyer’s need to know.
First I need to level with you, there really aren’t any “secret’s”. Getting from “I Love It” to “Sold” is not a mysterious uncharted territory never before explored by man or beast. Even if it might feel like it sometimes.
No, successfully buying a home that is a Short Sale requires agents who know what they are doing on each side of the transaction, seller’s who understand their situation and the process, oh, yes and the patience of a saint.
Here’s what I think Buyer’s need to know…
Short Sale’s take time, lot’s and lot’s of time. This is how you wind up paying for the savings that purchasing a Short Sale may give the buyer. And when I say time, I mean TIME. After an offer that is acceptable to the homeowner is submitted to the bank for approval it will take, on average, a minimum of one month before you hear anything at all. Don’t be surprised if it takes longer. The lender’s are swamped (no surprise there) and each and every transaction they are dealing with is complex, challenging and usually sitting next to a thousand others just like it.
Short Sale’s Are Not Always A Great Deal Remember that what is really happening when a lender agrees to allow a Short Sale to take place is that the lender is agreeing to take a loss on a portion of their investment, sometimes a fairly significant one, because it has been demonstrated to them that the amount they receive by accepting the reduced payoff will be greater than the amount they would receive if they take the home back via Foreclosure and have to sell it themselves. So, by allowing the Short Sale to take place they have already, in their eyes, effectively given the buyer a “discount”. So, while you can sometimes get a good deal on a home in this situation, in most instances you will be paying about or just a tad under current market value. What you do get as a buyer of a Short Sale is information that would not be made available to you if the home has already gone through the Foreclosure process. And, if you and your agent both really understand the process you may have less competition for the home you want because there are a whole bunch of folks out there who can’t or won’t wait for the process to run its course.
“When A House Is A ‘Short Sale’ The Price It Is Listed For May Not Be The Price It Is Allowed To Be Sold For”
One major difference between a home listed as a Short Sale and one that is either not in distress or one that has already been through the Foreclosure process and is now an R.E.O. (Real Estate Owned, meaning that the bank has Foreclosed on the home, bought it back and is now reselling it to recoup their loss.) is that the price placed on the home, while it may be very market appropriate, may not be the amount the Lender is willing to accept to pay off the Seller’s debt to them. So, don’t be surprised if you make what you, your agent and even your Great Aunt Nellie all know to be a fair or even a down right good offer for the home that may even be at or above the listed price only to have the lender respond with a different amount that is higher, sometimes significantly so, than your offer.
“Short Sale’s Need A Good Agent On Both Sides Of The Table” If you are working with an agent who does not understand the process and how to help you construct an offer that the seller can accept, and most importantly, that the lender will agree to, you could be dead in the water. And, if the seller has not chosen a representative that knows what they are doing and how they need to do it, you are even deader. I have seen offers come across my desk where the agent helped write an offer that would cut the second to less than nothing, significantly short the first and also ask for credits, repairs and closing costs. I chalk these up to agents that just plain don’t know the rules. Offers like these are a waste of effort, time and paper. Even for a wonderful agent who knows all the in’s and out’s every offer written won’t be accepted, but I believe that every offer I help construct should be able to be.
Short Sale’s Don’t Always Work Out But When They Do They Can Be A “Win” For Everyone
When a lender agrees to allow a Short Sale to take place it helps more than just the potentially defaulting seller and the new buyer, it helps the community too. Homes taken out of the Foreclosure pipeline and purchased by new, capable buyers will once again help to support the community at large by adding property tax payments to the city coffers and by keeping a home from going completely through the Foreclosure process, properties that could become vacant eyesores can instead continue their lives as family homes.
Bottom line, If you thinking about entering the housing market as a buyer, make sure you and your representatives are well educated on the ENTIRE process. And, provided that you know what to expect and what you are getting into when you start, buying a home in Short Sale status could get you the home of your dreams as long as you are not in a rush to finish.
Take care all, have a great day and help lots of people!
I.V.P.G. - Inland Valley Professional Group Powered by Keller Williams in Claremont/Upland/Rancho Cucamonga, California
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