If you are thinking about buying a short sale property there are a few things you will need to know before entering into a transaction.
What Is A Short Sale?
A short sale is where the seller owes the bank more than than the property is worth. The term “short sale” literally means that the property is being sold “short” of what the seller owes the bank. In a short sale transaction the bank must agree to accept less than what the seller owes and agree to release all liens on the property so that the property can be sold.
The Short Sale Process
When you make an offer on a short sale you must be prepared to exercise lots of patience. A short sale is unlike a normal transaction where you are negotiating directly with a seller. In a short sale transaction the seller signs your initial offer and then your Realtor has to send it to the bank for final approval. Once the file is sent to the bank your Realtor coordinates with several of the banks representatives including (but not limited to) a document coordinator, a negotiator, the investor who owns the loan and a closer. Each of these representatives has to sign off on many details of the file (including price, commissions and fees) before it can even enter into escrow. Once in escrow a typical transaction takes about 30-45 days to close. From the day that your offer is accepted to the end of the transaction you can anticipate a wait of 45-90 days or more to close a short sale transaction (depending on how many lenders are involved and the seller’s hardship).
So Why Buy a Short Sale?
Home that have been foreclosed on and rehabilitated by the bank often are in high demand and have multiple offers on them, which can be frustrating for buyers. Short sales are a good alternative because they are often in the same price range as foreclosures, but other buyers don’t have the patience to wait for the banks approval and therefore there is less competition to purchase a short sale property.
Short Sale Buying Strategies
1. Be patient – It can be a long process, but if it’s a home that you love and is perfect for your family it will be worth the wait.
2. Hire a Realtor who is a short sale expert. Experienced agents know how to increase your odds of actually closing a short sale transaction before ever making an offer on your behalf. For example, an experienced agent will ask how many lenders have liens on the property and if negotiations have already started with the lender(s). Experienced agents may also have relationships with banks that will speed up the process.
3. Keep looking while you are waiting for an answer from the bank. Banks can take anywhere from 45-90 days or more to make a decision on a short sale. It is okay to hedge your bets by making offers on other properties while you are waiting. If you find another property that you like prior to opening escrow you can withdraw your offer on the short sale property.
Our current market is a distressed market, which means if you are buying a home you will most likely be engaged in a transaction involving either a short sale or a foreclosure. Having knowledge of how the short sale process works will take the fear out of entering into a short sale transaction and thus give you more choices when looking for your new home.
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