Short Sale SellersHow to Buy A Short Sale
For many buyers, going through the short sale process can be quite a journey. Why? Common complaints come from the involvement of the bank or lender in the short sale process. Of course, the lender has every right to be involved in the mortgage short sale since they will be taking the greatest financial hit by allowing “short sale debt forgiveness” on the amount still owed on the mortgage and paying a real estate commission all realtors involved in the transaction. It seems like quite a lot of money, but for the right sale price of the house, the lender can make out better than foreclosing on the property as that option can include some heavy attorney and legal fees to process.
In a lender short sale, the lender must approve the sale of the short sale after an offer has been submitted or more than one offer has been received. The bank will most likely come back with a short sale counter offer. If the counter is accepted the short sale process will quickly complete. The banks want to move this property off their hands since they are losing money each month on HOA dues, property taxes, mortgage and the condition of the house may deteriorate over time due to the owner not caring for the property.
To newcomers who are looking to buying a short sale home, the idea of having to wait for a response that could take up to a couple months can be mind-boggling. It’s frustrating to real estate agents too. Here are some common questions when purchasing a short sale. :
1) I made an offer on a short sale but it’s taking forever to hear a response from the bank? Can I withdraw my offer without a penalty?
Yes, you can rescind your short sale offer any time before the bank accepts your offer. To cover all bases, you should have signed a short sale addendum which states something along the line that: “Buyer can cancel this contract anytime before receipt of a Short Sale Agreement Notice from Seller”.
2) I need to move into a house soon. Can I buy a short sale?
If you are not prepared to wait for 3 to 6 months for that house, then don’t write a short sale offer. Short sales can take different amounts of time, depending on the lender you’re working with. Some are quick, some are slow…and some will not close and the house will go into foreclosure. You have to be prepared to wait. Patience is key.
3) How long does it take to buy a short sale (eshortsales.net) house?
It can take varying timelines. Normal time is about a couple of months. Be aware that you may get involved in bidding wars with other investors looking for a good price and whom are also willing to purchase with cash up front. Banks will prefer this method. Make sure to have a good real estate agent who understands short sales.
4) Should I buy a short sale property?
You must expect that things will go sideways in a short sale deals. A number of things can go wrong. The closing date could be delayed, the bank won’t approve the short sale price and it may or may not make any sense why, the utilities are shut off during the property inspection, the buyer’s agent often agrees to a short commission and the amount may change in the end. Depending on what you agreed at the beginning of the relationship, you may owe the difference. Make sure that isn’t the case.
5) What to do with the earnest check? Who do I make it out to?
Once your short sale offer has been accepted, make the check out to “Escrow to be Determined”. That way the check isn’t deposited prior to the bank’s acceptance. No one should have their check deposited until a confirmed reply in writing from the bank is received. Otherwise there is no deal since the seller does not have the final say in the deal.
6) What should I offer on a short sale?
When making an offer to the bank, make sure to start with a low price since the lender will most likely counter with a higher price. You could risk losing the property with too low a price, so make sure you research comparable homes in the area and do your homework. In your offer, make sure to account for any fixes the home since the bank will probably sell the home “as is” and you won’t be able to request any fixes. Ask your real estate agent to find out if there are any other offers on the house. If the house has been listed for quite some time and there is no other competing offers, you can probably get away with a much lower asking price.
If you are making an offer on a pre-approved short sale, then the bank will have set a minimum amount since a BPO (broker price opinion) would have been completed.