SHORT SALES: BUYER’S EXPECTATIONS

Short Sales: Buyer’s Expectations

Investing in buying a short sale property can be a great bargain. You would be able to get a home at market value; lower than its competition. Here are some expectations for the buyer side of the transaction. To see the seller’s side, click on the link to see it’s counterpart.

What is a Short Sale? 

According the National Association of REALTORS (NAR): A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

When selling a home short, allows the owner to sell their home as opposed to the bank foreclosing on the property. It’s cheaper for the bank to allow the home to be sold short than it is to sell via foreclosure. The owner would not be able to receive a profit from the sale.

How Long is the Process?

The first thing to know when looking to buy a short sale is that it is not a quick process by any means; they take a long time to complete. The average transaction time is 4-6 months. The reason for this is that the offer has to go through to the bank, as opposed to the seller. Be prepared for the unexpected as well as defeat. It may sound harsh, but the fact is far fewer short sale transactions go to closing simply due to the short sale process. At times, it is much easier for a buyer to walk away from a short sale than to forge through the frustration. In the end, a buyer can receive a great deal, but should be aware ahead of time what is involved.

Condition of Home

The condition of the home may vary, it could be move-in ready or a fixer upper. Although a buyer may not be looking for a fixer-upper, a short sale property can end up being just that. Many homeowners who decide to enter into a short sale agreement are doing it because of financial reasons; so, maintaining a property they can no longer afford is, likely, not a top priority. As with any home sale, buyers should be sure to thoroughly investigate the property and have a home inspector do the same. If there are many areas in need of repair, it is important to factor those costs into the budget because short sale homes are usually sold “as is.”

Because homeowners who decide on a short sale are often struggling to meet their debts, they may have more than one mortgage out on the home, and maybe even additional liens. So, buyers should absolutely research all open loans and liens, or they could encounter major problems down the road. Title officers can help identify any loans and liens attached to short sale properties.

Other Hurdles

Unfortunately, banks are not the only hurdles involved in a short sale transaction. In fact, if a short sale property is being covered by mortgage insurance, then that can also put a damper on closing. Since a short sale does not cover the total amount owed on a loan, mortgage insurers can hold up the sale, simply by keeping quiet.

Tips on a Successful Short Sale Purchase

A short sale is a great way to get a lot of bang for a buyer’s buck; but it is important to remain realistic about the price. Banks are very likely to refuse lowball offers. Even if a seller agrees on a price, banks still want to see most of the money they are owed. One way buyers can protect themselves against bank refusal is by obtaining an agreement with the seller that their offer will be the only one presented to a lender at that time. With only one offer on the table, a lender may be more likely to move forward.

Finally, if a buyer’s offer on a short sale is accepted, the buyer should do everything to bring the transaction to closing and then enjoy their new home!

Interested in purchasing a Short Sale Property? Click on the link to see what short sale properties are currently available.