A NEW HOME BELOW MARKET VALUE: Purchasing a Short Sale Property

By
Real Estate Agent with GSH Real Estate

Short Sale Tips for Buyers

Please keep in mind that situations with Short-Sales differ based on the bank and the Seller's situation. So there is no real formula to buying a Short-Sale home. The best thing is to contact an experienced Realtor.  When searching for a Realtor, ask them the number of Short-Sales over there past year where they represented the Buyer.

First...What is a Short Sale?

A short sale is the sale of property below fair market value.  For the Seller this is where the bank is willing to take less than the loan balance in order to keep from foreclosing on a home. Banks like to prevent foreclosures instead of settling on a short sale case because it is less costly.

There are not any special lists of Short Sale properties especially if there is a cost to you. Most short sale properties are in your local MLS. So all you need to do is contact a REALTOR.

A short sale benefits the Buyer because you can purchase a home well below market value.

Time on Your Hands

The term Short-Sale is contradicting to the Buyer because the process is not short! It can take 60 days or more to close on a home. Therefore, you must be patience. 

Bank Representatives' have an increased number of cases to handle daily. Therefore, it could take 5-7 days just to get a counter-offer or ratified contract.  If you receive a counter-offer and decide to re-counter add another 5-7 days. Basically each time there are changes in the contract expect to wait any where from 5 to 7 days.

Can I Afford to Wait?

Your deposit money will be tied up accruing no interest in an escrow account from the moment the contract is ratified until closing. In most cases, you are tying up over $1000 of your money. If this would present a strain on your household income, I strongly recommend you not consider a Short-Sale.

Additionally, you could loose any monies used to conduct an appraisal or termite/moisture report if the Bank denies your contract. Unfortunately this could happen! Don't assume because you are the only person with a on the property - and you are pre-approved that you will get the contract.  Banks selling in Short-Sales are looking for Buyers with a strong financial history. 

"As-Is" Really Means "As-Is"

As I recommend with all my Buyers, always get a home inspection!  In most Bank Owned and Short-Sale cases, your home inspection may be for information purposes ONLY.  You are able to perform an inspection, but since the sale is "as-is," neither the seller nor the banks are likely to make any repairs. 

When getting the home inspection determine if the cost to repair items are within your budget. Also, please keep in mind that most lenders will not permit closing cost credits for repairs.

Best wishes to you in your home search and PLEASE consult with a REALTOR in your area because markets vary.

 

Comments (3)

Maggie Baumbach
Search Homes for Sale in Maryland at HelpShop.com - Reisterstown, MD

Thanks for all the great information.  Short sales are gaining in number and it is not as "simple" as a regular transaction. You have outlined a lot of really good points for buyers to consider.

Dec 15, 2008 09:25 AM
Tie Coleman
GSH Real Estate - Hampton, VA

Thanks Maggie,

There has been an increase in calls from my Buyers asking for Forclosed/Short Sale properties ONLY.  I just want Buyers to realize it is not a glorious process although an awesome opportunity!

Dec 15, 2008 09:31 AM
Ervin Alston
EMA GRAPHICS - Virginia Beach, VA

Great info.  Thanks!

Jenny

 

Dec 15, 2008 03:41 PM