Purchasing a new home is one of the most exciting experiences an individual or family can have. If you’ve been out of the real estate market for some time, you may be unaware of some dramatic changes in the real estate market landscape.
In today’s market, there are some unique situations which home buyers should be aware of as they prepare to consider the purchase of a new home.
GOOD NEW FIRST…
The good news is that home buyers in the Grand Rapids, Michigan area will find that they have a bountiful number of choices for a new home purchase. Inventory levels of homes for sale are at historic levels. In addition, mortgage rates continue to remain low. Homebuyers can still get a lot of bang for their buck!
HOW THINGS HAVE CHANGED…
However, home buyers looking for a home to purchase will also quickly become aware of a notation which currently accompanies a significant number of the homes listed for sale in the Grand Rapids Multiple Listing Service. This notation which is accessible to the real estate agent on the listing card, will indicate an advisory warning indicating that interested parties should be aware of the fact that the sale of the listed home will necessiate a ‘Short Sale’.
If you’re a brand new home buyer or recently re-entering the market, this may prove perplexing and you may wonder…What is a Short Sale?
SHORT SALES IN BRIEF…
Well, in short (pun intended)...a Short Sale has the ability to turn into the longest real estate transaction you've ever heard of. Although, my shortest negotiation was completed in 10 days, the average Short Sale requires 60-120 days. One transaction took seven months!
A Short Sale can be defined as the sale of a home priced below the mortgage balance owed on the home. (after costs associated with the home sale are paid)
WHAT DOES THIS MEANS FOR YOU…
Well, it depends.
On the most basic level, this means that in order to become the new owner of this home, you will have to complete a successful negotiation with the owner (s) of the mortgage note to purchase the home to allow the ownership to be transferred to you for less than the current owner owes.
This adds several additional steps and required signatures to the offer acceptance process which will now include: the home owner who signed the listing agreement, the lender (s) and in some cases third party investors.
But for starters, it means that you should be prepared to be very patient and persistent if you truly want this home. Short Sales are arguably among the most difficult negotiations to complete. It is not unusual for real estate agents to negotiate for months to bring these transactions to closure.
Being prepared for the long haul will save you angst of increased blood pressure, stress and unnecessary temper tantrums. It will also be deeply appreciated by your real estate agent who will probably accure more stress than a commission will adequately compensate for.
Buying a home which requires the negotiation of a Short Sale will also add some additional steps to the home purchasing process. Be prepared to wait while the bank (s) reviews the home owners paperwork to determine if they will qualify the potential Home Seller and home in question for a Short Sale. You can also anticipate that a Broker Price Opinion aka Appraisal may be ordered to determine if the bank wants to entertain your offer as one reflective of the current market conditions.
Offer submissions for Short Sales may languish on an Asset Managers desk while they sift through hundreds of files which have landed there before yours or wait to see if a better competing offer comes through. Be persistent. If you’ve done your homework and received professional consultation from your real estate expert, you should be aware of the Value of your purchase. A Short Sale negotiation done correctly can earn you your dream home with a significant amount of equity attached…no small feat in today’s market.
HIRE A PROFESSIONAL…
Short Sale negotiations are often complex transactions. It's important to understand what is being negotiated and the implications for your credit. There is a difference between being given the 'go ahead' to retail your property and being absolved of the obligation to pay back your note. In Michigan, a deficiency judgement can require re-payment on a loan years later. We advise you to obtain additional professional counsel which may include your tax advisor and/or attorney to determine what the best route is for your specific situation.
Although it’s not possible to cover the complexities of the Short Sale process in this short post, you might find the links below helpful as a home buyer or home seller in the Greater Grand Rapids, MI area. You can also contact us at info@auduhomesto discuss the particular details of your situation. We specialize in advising clients on strategies to buy and sell property in a challenging market.
*This blog post was orginally published in 2008. It has been updated to reflect the marketplace considerations today.