Everyone is talking about foreclosures and short sales! I can't tell you how often I get a call from someone who wants a "steal of a deal" and would like to look at foreclosure and short sale homes. In talking to them I find that they don't always understand the difference between the two. So, here's some information on short sales to help clarify.
What is a short sale?
When a seller owes more than his/her home is worth, it is considered a short sale because at closing they are "short" the amount needed to pay off their bank.
How can it close if there isn't enough money to pay off the bank?
The seller can accept an offer to sell "subject to the bank agreeing" to accept less than they are owed at closing.
Why would a bank do this?
If the seller is behind in payments and foreclosure is imminent, the bank may choose to get rid of the property at a loss. This saves the bank the expense and time of going through a legal foreclosure process. If they choose to foreclose, they still have to sell at current market value eventually.
Why would a buyer choose to buy a short sale property?
A lot of the homes currently for sale in the Vancouver/Clark County. Washington market are short sales, so being willing to consider them, opens up a lot more homes to choose from.
What is the downside to buying a short sale?
Just because the seller accepts your offer doesn't mean the bank will. It usually takes 30 to 60 days for the bank to respond to your "short sale" offer. After waiting for a long time there is no guarantee that your offer will be accepted and there is no way of telling ahead of time how long it will take before they will respond. It can be very frustrating.
What strategies should a buyer employ when considering buying a home that is a short sale?
The listing agent has 2 approaches he may use in trying to sell the home. Some agents believe that they need to represent the interests of the bank that is losing money. These agents leave the home for sale during the lengthy bank response time, thereby hoping to have multiple offers and create a "bidding war." If you choose a home in this category, cross your fingers and keep looking. If you find another home you like just as well and can get an offer accepted, you can rescind you offer on the short sale home.
Some agents believe they need to help the home owner who is in a bad spot and losing their home. In order to encourage the bank to respond quicker, these agents only submit one offer to the bank and accept any additional offers as a backup only if the first offer does not get accepted. In order to feel comfortable removing the home from the market, the offer needs to be one that they reasonably feel the bank might accept. In this scenario, buyers usually are willing to wait and see if the short sale offer they made is accepted because they know they are the only offer being considered.
How do I know how much to offer?
The bank is going to get 3 broker price opinions before they respond. If your offer is quite a bit lower than they could sell the home for if they took it back in foreclosure, they will reject the offer. If it is close to what they will get anyway and you can save them the hassle of foreclosure proceedings, they will accept the offer.
You will see homes for sale that are a much better deal than the others you have seen. If that home is a short sale, don't bother making a full price offer. Just because some idiot Realtor prices a home very low (below market) doesn't mean the bank will accept your offer. If you want the home, you should offer a price that is close to what the bank could sell it for after foreclosure or else don't go through the frustration of waiting and waiting for an answer. The bank will not sell it stupidly low if they could wait a couple months and sell it for quite a bit more.
Why would I want to hire you as my agent when I am looking to buy a short sale home?
As your partner in this process, we need to decide which strategy we will use. Many of my clients only make offers on short sale homes that the listing agent agrees to only accept one offer to submit to the bank. In that case, it is my job to weed out the 75% of short sale listing that don't fit this criteria. I call each listing Realtor and find out their approach so that we don't waste soooo much time messing with properties that will have multiple offers. Quite frankly, my clients never win the bidding war. It is a buyers market and you are supposed to get a good buy. You never get a great buy if you are the dumbest guy and bid the highest price out of 10 - 15 buyers who have submitted offers. In the local Vancouver/Clark County, Washington market, it usually makes better sense to not waste our time on properties that will have multiple offers and just zero in on those that we can get a good value on by having the seller only submit one offer to the bank. Of course that means we have to be first!
In addition and in order to be the first to make an offer, I search the new listings and those with a price reduction daily, looking for those that fit your perameters. You may hear it is a slow market, but the market is very fast for the homes that are priced right. You need to get the information daily and be willing to move fast to get the home off the market when you see a good one.
Since I have successfully negotiated a lot of short sales for my clients, I have learned some negotiation strategies that makes your offer look more desirable to the bank. Some of these include: size of the earnest money, preferable wording used in the "pre-approval" letter. time frames for certain trigger events, how to approach net vs. gross price, rescindable vs. non-rescindable offers, verbiage used in the inspection clause and more.
I first got my real estate license in 1978 and am typically in the top 2% of Clark County agents. I answer my phone and understand the need to be responsive when we spot a good one as well as during the long closing process. References are available. You can also check out my website for more information www.whenyouneedagreatrealtor.com
WHEN YOU NEED A GREAT REALTOR...
WHAT ABOUT BOB???
Bob Bloom, Partner
Keller Williams Realty in Vancouver, Washington
360-607-5829
www.whenyouneedagreatrealtor.com
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