For many buyers, the idea of a short sale implies a great deal. It can be, but you need to know what goes along with the great deal. First, let’s define what a short sale is. A short sale is when a property owner needs to sell their property but they owe more than the property is worth. they must petition the bank to allow the deficiency and the sale of the home for the reduced amount.
This process is far from “short” in fact, it can take a very long time to complete. As a buyer, you must be committed for the long haul and ready for a barrage of delays and mis-information. If you go into the short sale knowing what to expect you CAN get a great deal.
I have mixed emotions about short sales. As an agent I know what they entail and I always want my buyers to get a great deal on a home, but I also know how frustrating they can be. Many buyers are just not patient enough to handle a short sale. If you have time constraints and must be in a home in a short amount a time, a short sale is not for you. If you have little patience, a short sale is not a good idea. You need to know upfront that your agent has little to no control over the short sale since he is not the one negotiating it. If however you have time and patience, you should definitely consider the purchase of a short sale. Here are a few suggestions to help you navigate.
- Don’t spend any money on a short sale until you have a full written approval from the bank. Until you have approval, there is no guarantee that the sale is going to happen and you should not complete any paid inspections, appraisals or similar until this happens. Some agents will try to force a buyer to do so prior to written approval. If they do, strike it from the deal or find another home.
- Bid a realistic price for the home. Many buyers think they can offer ridiculously low and that the seller should just accept the offer since they are not making money on the deal. Not true. The bank will verify the actual value of the home and if it is too low, they may kill the deal and contrary to popular belief, they do not always counter the price.
- Make sure you know if there is a fee for the negotiation process. Many agents use professional negotiators to process a short sale. The fee is sometimes worked into the deal, but in some cases a buyer may be required to pay for the service. This fee is only collected if there is an actual sale and NEVER should be paid upfront. You should consider this fee when making your offer. I usually include a closing costs concession to cover the fee and in some cases, the fee is entirely paid by the sellers lender.
- Plan for at least 4 months of waiting for a written approval. Unless the home has been approved once before, the process takes about 4+ months unless you get lucky and sometimes, it’s much longer. You should find out a few things before making your offer. 1. Who is negotiating the deal? If it’s an agent for the seller, run. 2. How many loans? less is better. 3. Are they behind on HOA or condo fees? If they are and not willing to pay, you could already be dead in the water. Your agent can help guide you.
Overall, I never say never to a short sale, but make sure you have the stomach for it. Do your homework and make wise choices. Questions? Give me a call. There is a lot more to discuss beyond what I have covered here!