Uncovering a short sale deal takes smart detective work. There are certain deductions that can be made when considering purchasing a Short Sale to help develop conclusions about the final outcome. Asking the right questions will take the mystery out of purchasing a Short Sale and reveal details about the sale that will determine if a Short Sale is worth the wait.
- What does the tax records show as the projected sales price of the home?
- How many mortgages are there on the property?
- Is there a Home Equity Line of Credit?
- Are there any tax, judgements or mechanic man's liens filed against the property?
- What banking institution services the mortgage?
- Is there a past due balance on the monthly HOA dues?
- Will the seller keep the monthly HOA dues current until close of escrow?
- How much is the HOA transfer fee?
- How much is the HOA disclosure fee?
- Is there an HOA special assessments or a capital reserve account that the new owner will acquire after closing?
- Will the owner keep the utilities on for the home inspection after bank approval of the offer?
- Will the seller pay for a termite treatment, if necessary?
- Will the seller's bank contribute to my closing costs?
Here is why you should ask these questions:
The county tax records can be an effective tool in determining the current market value. Banks will have an appraisal done on the property to use as a guage for incoming offers. They want to make sure they are getting fair market value. Adjust your offer accordingly.
The amount and type of liens on the property can determine the length of time and likelihood of a successful Short Sale approval. Let's face it, some banks are better at closing Short Sales than others. Your professional real estate practitioner will be able to tell you from their experience which banks are winners in closing Short Sale transactions.
Most banks will not allow for any of the proceeds of the sale to go towards HOA fees past, present or future. These costs must be absorbed by the buyer and seller. Traditionally, the seller pays all HOA costs up until close of escrow. The buyer pays any special assessments or capital reserve that will benefit the buyer for any future improvements to the community in which he lives.
As a buyer, be prepared to pay HOA costs, turn on utilities in advance for a home inspection if the seller is financially unable to do so, and, if you get lucky, the bank may contribute toward your closing costs. Just remember, in the end, despite the additional minor fees, you're getting a great deal on a house!
After all the evidence is in: know what you are getting into financially and emotionally before taking on a Short Sale. There is no guarantee that a Short Sale offer will be approved by the bank and close escrow. You don't want to get down to the final negotiation stages and find out you have been waiting for a frog!