Short Sale SellersThink You’re Ready to Buy a Short Sale?
Most buyers will enter this market and think that buying a short sale is a great deal. On the surface, a property listing photo may look very attractive, but there is usually a slim margin of short sales that are profitable to the buyer (but of course, there are exceptions).
Here are a few reasons why, a buyer may not want to purchase a short sale:
Sellers Overpaid
If the home was purchased for $650,000 two years ago and the listed price is now $400,000, then you know the buyer is losing money. The seller has NO equity.
Sellers Borrowed Way too Much
Banks like to lend money when home prices are appreciating and will let borrowers over-mortgage their home. Many times the loan balance will exceed the property value. Some appraisers will even give a higher appraisal if they feel pressured by the bank to offer the home owner more to borrower.
Strict Qualifications
Unethical real estate agents (or newbies) may push the seller into a short sale when the seller does not qualify for one. The sellers must show a proof in hardship and submit evidence in a letter to the lender for approval.
Homes Sell “as is”
If the mortgage company does agree to a short sale, then it will be responsible to pay for the real estate commission and closing costs. Thus, lenders will usually ask the buyers to buy the home in its present condition and will usually refuse to pay for the following:
- Pest inspections
- Roof certification
- Home protection plans
- Deferred maintenance
- Suggested repairs noted in home inspection
Length of Time to Close
The lender’s back-log of foreclosures can be very long and can make getting an answer from the bank a long process. It can take 2 weeks to 2 months to get a response on a purchase offer from the lender. If there are more than one lender involved, it can take longer to get the demands met by the second lender
Lender can Change Conditions At Will:
Some lender have the right to renegotiate the terms of the short sale at the very last minute. If the market changes, new laws come into effect, the lender can make an attempt to change the contract terms.
Discounted Commission
Lenders will usually pay a discounted commission to the real estate agents. Most of the time, the real estate agents are doing two to three times the work and do not get appreciated for the extra work involved.
Higher Buying Closing Costs
Lenders will usually not pay for anything extra. They may refuse to pay for standard seller closing costs.
Less Transaction Control
If you need to close escrow by a specific date, the short sale may cause things to become more complicating. If you are trying to close escrow at the same time as selling your home, it may not happen.