While there are some caveats to buying a short sale, if you have the time and patience to see it through, short sales can be a great opportunity to find a property at a competitive price. When looking for a distressed property our team is here to help.
Buying Short Sales
As a buyer in the current real estate market, you are likely aware that there are many short sale properties on the market. A short sale is a property where the market value of the property is less than the loan amount owed to one or more lenders. A short sale property may be a good deal for you, but there are some things to know about short sales before you begin the processing of buying one.
A Short Sale Must Be Approved By The Lender
Even though a seller might accept your offer, it will be subject to approval by the lender. Note that the listing price is set by the agent and seller, not the bank. Some short sales on the market will be priced extremely low – these extreme lowball prices will very likely not be accepted by the sellers’ bank. A lender will also likely send out an appraiser to evaluate the property value to advise the bank accordingly. You should be prepared to offer a price near market value to have the best possible chance of having your short sale purchase approved.
Be Prepared To Wait
Even after your offer has been accepted by the seller, the offer and sale of the property still must be approved by the seller’s lender (or lenders, if there is more than one mortgage). This requires a long process of paperwork and negotiations, which on average take about 4-8 months (sometimes longer, sometimes shorter). You should be prepared to patiently wait for the approval, and once approved, you will begin the escrow process.
Lender May Not Approve Any Repairs
If the short sale is approved, it will likely be as “as is” sale, meaning the property will come to the buyer as is, with no repairs done by the seller. While standard sellers and even REOs may repair property defects or offer credit for repairs, it is far less likely for this to happen in a short sale. It is important to conduct an inspection of the property to make sure there are no deal breaker problems, and that you are prepared to make any needed repairs to the property.
“Approved” Prices are Quickest
Though short sales may not always be short, making an offer on an “approved short sale” can be a quicker process. An approved short sale has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but did not end up sticking around to buy the property.
Work With An Agent Experienced in Handling Short Sales
Buying a short sale can be a very tricky and complex process, so it is extremely important to choose an agent with short sale experience. Make sure you ask your agent how many buyers they have represented in a short sale, and how many they have successfully closed. Having an experienced agent on your side may be the difference between getting your short sale purchase approved or not. A qualified real estate professional will be able to show you short sale properties, get your offer accepted, help you negotiate the purchase when you find the right property, and smooth communications with the lender.