Does that price sound too good to be true?
Ok, so the property is a short sale. Im not sure how much you know about short sales, so Ill start from the bottom...
A short sale occurs when a homeowner attempts to sell their home for less than the amount that is owed on it. Banks will often grant the seller permission to do so in the interest of avoiding the costly foreclosure process.
Here is how they generally work. The homeowner puts their home on the market with a Realtor® at what the Realtor® and homeowner decide is fair market value. Simultaneously, the homeowner (or sometimes a third-party hired specialist) will write a letter of hardship to the bank. The letter of hardship explains why the homeowners can no longer pay the mortgage amount (i.e. job loss, divorce etc.).
Once a qualified buyer comes along, the homeowner and broker will submit any or all of the offers that they receive to the bank. The bank (lien holder) will assign a negotiator (paid by the bank) to determine if the offer is close to the market value. They will often elicit the assistance of an unrelated real estate broker to establish a broker's price opinion (BPO). The bank wants to assure that they are receiving a figure reasonably close to today's fair market value.
Eventually (and I mean eventually) the negotiator will then contact the listing agent and and convey either an acceptance, denial or present a counter offer.The time span between your initial offer and the response from the bank's negotiator can be anywhere from 1 week to several months. This is where the patience comes in.
Assuming the bank accepts your offer, and assuming that you are equally interested in moving forward, the transaction will carry on as a quasi-normal real estate transaction. Under the guidance of your buyer's agent, you will commence with home inspection and other tasks that precede a home purchase.
As a general rule, the banks are less willing to re-negotiate after a home inspection than a standard seller would be. Additionally, there will often be some or many disclosures to sign depending on the bank. As always, any disclosure or documents that you do not fully understand should be reviewed by your real estate attorney.
It is generally the initial offer and subsequent response which represent the biggest hurdle to buyers. Overall, it can be a very time consuming and frustrating process but you can get some excellent deals. It is a matter of patience. For the buyer with a flexible living situation prior to buying the new home, short sales can be an an excellent way to truly taking advantage of this market.
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