12 Must Know Steps When Considering Purchasing a Short Sale Property
It is on the 5:00 News, printed in our local newspapers and being discussed around the water cooler! As banks continue to foreclose on homes in the area, buyers will find some amazing garage-sale priced homes; but buyers have opportunities to buy homes through a "short sale" before a home goes into foreclosure.
What is a "Short Sale?" A Short Sale may be defined as the sale of a home at a price less than the existing mortgage balance. It may or may not be in a foreclosed status; however the ultimate price of a short sale lies in the willingness of the bank to negotiate terms. This is a complicated process and in the recent past, a rare occurrence. Without a doubt Short sale transactions will be prevalent in the 12 to 18 months.
It is good advice to consider hiring professional help when you are looking to buy a home. There are so many legal loop holes that the average person could be steered in a wrong direction or taken advantage of. It is important to point out that the majority of lawyers and real estate agents have little experience in these sales. In order to be successful, you need to be very careful in who you select to be your facilitator and guide through the arduous process. The most important point to consider is: Going it alone when purchasing homes in foreclosure or negotiating a Short Sale will significantly increase your chance of failure.
The 12 steps in the process are:
•1. Begin your search by locating homes which are in default as early as possible. The optimal time is before the formal non-judicial foreclosure begins.
•2. Search foreclosed homes with plenty of lead time before the Trustee's Sale (you may need weeks or months of lead time.)
•3. Created short list of homes you have identified and narrow that list to only those homes you would likely purchase for yourself. Put the word out within your social circle, as they may a great opportunity waiting.
•4. Complete an accurate Comparative Market Analysis (CMA) using sold homes with similar features. There are several online sites available in addition to your local MLS. A Local Realtor with Adequate Short Sale experience will be able to assist you with utilizing your local MLS system.
•5. Determine the exact mortgage balance and status of default or foreclosure.
•6. Do not overlook the possibility of a second or third mortgage on the house.
•7. Have a title Search and Hold done on the property. A Search and Hold can be done by a local Title company. This will expose any other liens (tax liens, mechanic's liens, labor liens, state liens, etc.) that may have been attached to the property.
•8. Determine how best to talk and negotiate with the loss mitigation department of the bank or mortgage holder (email, fax, phone, etc). Again, a seasoned Realtor in this area can provide valuable assistance.
•9. Determine whether or not purchasing via the short sale will negate any subordinate loans or liens (another trap for the unwary.)
•10. Know which costs and fees in addition to the mortgage balance can be compromised and by how much (experience is the best teacher.)
•11. Prepare a comprehensive package to present to the mortgage holder, which is the most critical step in closing a short sale. This should include the Purchase & Sale Agreement, and a thorough analysis of the home. The analysis should include comparable prices, the local market demographics, repair bids, third-party appraisal and other pertinent information that will provide justification of your offering price. Your offer must be prepared very professionally or the bank will overlook you and move on without second look. Often times, you will not have a second chance for that first impression, so make it good. Illustrate a clear and concise story and provide data to back up your story. Simply put, you have to be able to make a case to the bank, as to why they should sell to you at this price.
•12. In order to close on a deal in a short sale, you must follow through with all parties involved.
The complexity and difficulty of closing short sales should never be underestimated, even under the best of circumstances. It is difficult to find a buyer of foreclosure properties through the short sale process, despite what con artists would like you to believe. You should have some experience before purchasing foreclosure properties and/or attempting to negotiate a short sale transaction. It is vitally important that you educate yourself and be aware of entrapment when dealing with these types of transactions.
Buying a foreclosure can provide a great benefit and it can also be a fast way to lose money. Do you homework, align yourself with professionals with experience in this type of transaction, and all cost avoid major mistakes by overlooking or discounting the items mentioned above.
Short Sale and Foreclosure properties can be a great way to pick up equity immediately, and get you into a great home for pennies on the dollar.
If you are thinking of doing this, please feel free to contact me and I will put you in touch with one of my preferred Real Estate Agents that specialize in short sales. Together we will assist you every step of the way. I hope you have found this information useful.
Be sure to visit my website http://www.wisconsinloantips.com for more great information -
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