These answers are just for general information .Do not use them to make decisions regarding the buying or selling of a property. It is advisable to consult with an attorney, financial advisor, CPA or Tax Advisor or other professionals regarding engaging in a short sale so as to properly assess the risks of your specific situation.
•1. Why would a bank reject an offer?
There are several reasons a bank may not accept an offer; some of the most common are:
•· The price accepted by the seller is too low.
•· There may be multiple offers and the bank selected another buyer.
•· You may not meet their credit qualifications.
•· Your offer may have insufficient earnest money.
•· The purchase and sale agreement is not complete.
•· You do not have at least a loan preapproval (not loan prequalification) letter.
•· The listing agent has not submitted a complete short sale package.
•· There may be more than one lien holder and they cannot agree.
•· The seller may not qualify for a short sale.
•2. What is a third party negotiator?
The seller's agent may contract a third party to handle all communication and negotiation with the bank.
•3. Is there a fee for the third party negotiator?
The negotiator will charge a fee which may be paid by the bank (banks are becoming much more stringent and many just will not pay any fee) or the try to pass the fee onto the buyer. Make sure you understand if you are agreeing to a fee, how much it is and if it is in your interest to do so. If you are willing to pay the fee, do not hesitate to have your agent negotiate the amount.
•4. How much earnest money should I put down?
It is important to show the bank that you are a serious buyer. A strong earnest money deposit of 1.5%-3 % of the sale price is my recommendation. It is a definite factor in the bank's consideration of your offer. The bank may require having the money put into a trust account or escrow account. So keep in mind this money may be tied up for months.
•5. Once the bank approves my offer how long will I have to close the transaction?
After taking months for the bank to decide on your offer, once approved you may on have 2-4 weeks to close the deal. So be ready to go. Have your financing (preapproval letter) in place and your inspections, neighborhood review and all other due diligence completed.
•6. May I do an inspection on the property?
In all likelihood you may do inspections but they will mostly just be for informational purposes. The bank will want to sell the property ‘as is" and will not do any repairs unless required to meet federal loan requirements or solve environmental issues. You are getting a good deal on the property and repairs simply become part of the total cost. Keep in mind that the seller is in a difficult financial situation and may have let the property deteriorate. If there are significant repairs you may want to get estimates so you may better understand your financial commitment.
•7. Should I wait until I get bank approval to do the inspection(s)?
There are different opinions on this question. One is to save the money and wait until you get bank approval. The belief is that the bank will give you enough time to close to get it done. Another is to do the inspection to see if you even want to make an offer and obligate yourself for months waiting for the bank's response on a property that may have too many repairs or problems. The bank may only you give you a couple of weeks to close the deal regardless of what is said upfront and you risk losing the home. It's a decision that is specific to your needs and the condition of the home.
•8. What is a "good deal" on the property?
It all depends on the location, neighborhood, condition of the property, size of the loan and the motivation of the bank to dispose of the property. Banks want an offer reasonably close to market value...likely 5-15% below market. Offers which are not within 15% may just be rejected or worse sit in their files for a long period of time without any response.
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