In a recent post, I described the short sale process as a win-win-win situation, and it is. The lender avoids taking yet another property through foreclosure. The homeowner avoids the foreclosure process and the enormous credit impact associated with it and the buyer gets a great deal.
If the deal closes. If...
When you make an offer on a property being offered as a short sale, you need to understand a little bit about short sales and what to expect. The first thing to understand is that although these transactions are becoming more and more commonplace, there is an excellent chance that your realtor will not really know a lot about the process. Is this because they are not good at their job? No. Short sales are just not common enough for the average realtor to have come in contact with a lot of them and while your realtor is hopefully an expert in more common areas like property selection, valuation, negotiation, etc., this "newer" field may be daunting.
The second thing I want you to know is that the process is not fast. Your patience is going to be tested and if you are not ready to exercise extreme patience, maybe you should pass on this particular deal. From the time you submit your offer, you should expect at least 4 weeks before you find out if the bank has approved it. If they approve it, you are going to save thousands of dollars, so if you don't have to move tomorrow, this might be worth your time.
My next little nugget is very important if you don't want to waste your time. You can apply this technique to other deals as well - it is not restricted to the short sale arena. Negotiation requires both parties to succeed in order to be successful. If you try to steal the property, you are just going to wait for 4 weeks or more and get rejected by the bank. In a typical short sale transaction, the bank will send out realtors they trust to evaluate the property's value. Then the bank will evaluate the offer to see what percentage of the property's value they are going to realize after paying all of their expenses. If that percentage is 80 or higher, they will probably accept. If it is lower than 80, they will proably reject the offer.
What does that mean in English? If the property is worth $100,000 dollars, don't offer $80,000. Sure, the home owner wll agree to it, but the bank won't and four or five weeks later you will have to submit another offer or look for another property. Remember they need to NET 80% of the value. Offer 90% and you have a great chance. How do you determine the value? That's where your realtor comes in. If you don't have a realtor, you can call me, Chris Compton at 770-682-7735. I will walk you through the process and help you succeed.
Short sales are odd transactions because you are buying the property from another individual, but their lender has final say so on the deal. Make sure that their lender is getting what they need and you will find yourself in a great home for a great low price.
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