Placing an offer on a short sale
Ready to make an offer on a short sale? Here are the steps to make sure your offer stands a chance. Remember, a short sale simply means that the seller is upside-down on their mortgage. Their lender may, or may not, know that they are even trying to complete a short sale. The house may or may not be in some level of pre-foreclosure. The bank has no obligation to approve or even respond to a short sale offer. There are many documents that must be submitted with a short sale offer for it to be considered. As a buyer, you don't a lot of control but here are some basics that will help you with your short sale purchase.
* Please note, this is my opinion (a short sale listing agent) for the highest chances of success. Many listing and buyer’s agents will handle it differently. We have much experience with short sales and this is how we’ve been successful. *
- Have a pre-approval letter (if obtaining a loan) or proof of funds letter (if paying with cash) ready. Make sure the proof of funds letter or bank statement is recent. Also make sure it shows enough funds to cover the purchase price you are offering. If you have a pre-approval letter make sure it was written in the last 30 days.
- Hire a REALTOR who understands the short sale process. If they claim that ‘short sales never close’ or that ‘short sales are a waste of time’ or something similar find another agent to work with. It is true, not all short sales close. But, if you work with a listing agent who does successfully close short sales you have at least a 90% chance of it closing.
- Look at houses that are priced correctly and in your price range. In this market you cannot look at homes well above your budget. Houses are selling at, over, or very near listing price. Also make sure the house is listed near market value. Not sure what market value is? Make sure your agent pulls comparables for any listing you consider making an offer on. If the house has a market value of $75,000 and the listing agent has it listed at $50,000 WALK AWAY. This agent doesn’t know how to price a listing. If on the other hand, they know they priced it low to entice auction-style bidding, put in your highest & best.
- Make sure that before you put in an offer your agent has shown you comparables. I know I just said that but this is critical. If the offer is not within market value the bank will most likely decline, or not respond to, your offer.
- Make sure that your agent speaks with the listing agent to see if they've had any communication with the seller's lender. Make sure that they have had experience with actually closing short sales. Make sure that they have the seller's documents ready for submission or already submitted.
- Make sure your agent asks the listing agent how they are handling offers. You want to be sure that the seller is going to sign the winning offer. And sign only ONE offer. Short sales can take 30-90 days for an answer and you certainly don’t want to wait for 90 days to find out that there was a higher or better offer they were working on also. Make sure that they are only going to accept one offer. If it is yours then make sure you have a signed copy of it. If it is not yours move on to the next.
- Some listing agents have special documents they require in order to submit the offer. Make sure all of these documents are including. Here are the must haves & below are the might ask fors.
- As-Is Contract for Sale & Purchase - filled out and signed (if FHA or VA then add that addendum)
- Short Sale Addendum - FAR has one we use - make sure checkboxes are checked & this is signed
- Pre-approval letter or proof of funds
- Escrow deposit or terms describing when the escrow will be deposited.
- Additional addendums or disclosures (real property disclosure, chinese drywall disclosure, lead-based paint disclosure, hoa disclosure - are some examples)
- Your offer is submitted through your agent to the listing agent. The seller responds. Remember, the seller is still the owner. They must sign the offer for it to become a contract. The bank will NOT sign the offer. The bank will send a letter of approval if they approve the sale.
- You should receive a signed copy of the offer, now a CONTRACT. This is a legally binding contract subject to third party approval (the seller’s lender).
- You wait. Depending upon the terms agreed upon. We usually suggest a 45 day window for approval. Sometimes this takes longer. Sometimes it is a short time frame. 45 days is a good starting point though.
- The listing agent will update your agent. Usually updates should be weekly; more frequently near the end when additional addendums may need to be signed.
- Once the approval is received you need to make sure your funds or loan is ready to go. Sometimes the bank only gives 20-30 days to close. You must be ready. Get your inspections out of the way & be ready to close.
- You close just like any other purchase. The closing should take place at a Title Company or attorney’s office. You will get a Title Insurance policy. The buyer should, in most cases, not be responsible for any outstanding fees, liens or bills, unless otherwise negotiated.
- Congrats. You just made it through a short sale closing.
I know this is an awful lot of information. Especially if you have never purchased a home or if you have but have never been exposed to short sales. Having a real estate professional on your side who truly understands short sales is critical.
Our office closes many short sales each month. Our agents understand the process and know the right questions to ask to make sure there is a chance of the short sale making it to closing.
For more information on the short sale process or to speak with one of our agents about how we can be of assistance please call our office at (239) 542-8521 or Toll-Free at 1(888) 764-6665.
We look forward to hearing from you.
Good luck & make it a GREAT day!
Yours in Success,
Florida Future Realty, Inc.
2816 Del Prado Blvd. S Unit 2
Cape Coral, FL 33904
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