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Short Sales. Are they for you?
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SHORT SALES FOR BUYERS - IS IT A GOOD CHOICE?
Absolutely, you can get a great deal on a short sale.
What is a short sale? Briefly, it is when the bank or investor that holds the mortgage is willing to take less than what is owed on the property, in exchange for the sale, and can most likely, write the loss off their taxes.
Many times if you can be patient, you can get a much better deal on a short sale than a bank owned or foreclosed property. If you are not working with an agent, it would be a good idea to find one experienced in Short Sales. Since the purchase of real estate is one of the biggest purchase decision you will make in your life, it only makes sense to have the expertise of a seasoned agent on your side. In most cases the "Seller" or "Short Sale Bank" will pay for the services of your agent, without any influence on the price of the property.
Once you find a good agent, Here are a few questions your agent should ask the listing realtor, to find out if they have done their homework or know what they are doing.
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Has the bank approved the short sale?
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Has the seller submitted all the required paperwork to the loss mitigation department? (i.e., hardship letter from the seller, financials substantiating why they are in trouble with the mortgage payments, agent authorization, tax returns, etc..)
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Have there been other offers on the property?
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If so, is one currently being considered or have any been accepted?
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If not, why? (You really need to have a good Buyers Agent that is willing to dig deeply and be bold about asking questions of the Listing Agent or you could be in for a long process, sometimes with little results.)
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Have the bank(s) stated a "net amount" they are willing to take for the property?
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Are the utilities still turned on so that you can inspect the property and fixtures?
Engaging in short sale real estate transactions is a complex and lengthy process. Make sure you have an experienced Realtor and real estate attorney that have experience with Short Sales.
Having done numerous short sales ourselves, here are some additional tips to keep in mind: Make sure the seller is willing to sign at closing. Sometimes sellers can be angry when they are losing their home and may not want to sign the closing documents, because the buyer was able to purchase the home at a huge discount. This can be stressful for all parties and you'll want to take steps up front to ensure that this doesn't happen to you. Also, if you are making the first offer on a short sale, be prepared to be patient. Realize it could take a while. Usually a first round "Short Sale Offer" can take 4-6 weeks in order to get an approval from the loss mitigation department (at the mortgage company). The positive side is, if it works out, in most cases you will get a great deal on the property. Call us today and we will send you all available short sale or foreclosure listings in the area of your choice!
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What is a Short Sale?
A short sale can happen when a Lender agrees to take less than the total amount owed. In this way, real estate can be sold and the Lender gets a cash pay off. Will a Short Sale destroy my credit?
Yes and no. The short sale may not show up on your credit. In fact, most mortgage trade lines report “Mortgage Paid” or "Paid as Agreed" after a short sale. Any late payment history will still appear, as will any Notice of Default filings. What won’t report is an actual foreclosure. A promissory note may prevent the lender from reporting the mortgage as a loss. In today’s credit market, a foreclosure may prevent you from obtaining a mortgage for at least 5 years, longer than a bankruptcy. How long does this take?
It is all up to the lender. But in general, you should anticipate at least an additional 3-4 weeks in the process. However, if the Lender's Short Sale representative is extremely busy, it could add additional delays. It is usually a good idea to have your Realtor find this information out before committing to make an offer. Why would a bank accept less than what is owed?
A lender will do almost anything to avoid foreclosure, it looks bad on their books and affects the rate at which they can borrow money. In addition, it is a lengthy process for the bank and many times they will end up needing to do repairs, etc. to get it ready for market. Then they are looking at the lag time of trying to sell the home. Because of this and other factors, the mortgage company will be willing to take less than what is owed, to a reasonable extent. |
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