Part 1: Buying a Short Sale
Short Sales – The Good, The Bad and The Ugly!
Today I want to take a little time to discuss a topic that tends to get a bad rap – Short Sales. Even hearing the term short sale, people cringe. Why? Because short sales can be confusing, time consuming AND frustrating IF you don’t know what you are doing. So I want to share some basic short sale information with you and give you some tips and tricks to help you glide through the process with ease!
What is a Short Sale???
First things first…what is a short sale? A short sale is when lender receives less than the remaining amount owed on the property after all the costs associated with selling the house. And why would a lender agree to this? For a lender, foreclosing on a property is actually pretty expensive with attorney fees, holding costs, repairs, etc. Plus a foreclosure generally sells for less than a short sale. So in most cases, agreeing to settle for a loss outweighs the cost of foreclosing. And from a borrower’s point of view, a short sale is a better option because it will not hurt their credit as bad as a foreclosure would and in the case of active military personnel, a short sale will not eliminate secret clearance eligibility the way a foreclosure will.
How does the Short Sale process work???
Next, let’s discuss the short sale process! The short sale process can be daunting no matter what side you are on – buying or selling! BUT again, let me say this! It is manageable as long as you are working with the right team of people. Align yourself with an agent who is experienced with short sales and knows the ins and outs of the process.
Buying a Short Sale
Buying a short sale can be a great way to get a great deal on a house because you are buying it at a lower price than you would in a traditional sale. However, because you are essentially negotiating/ dealing with the lender rather than the homeowner, getting approval or responses can take a long time. It is not like picking up the phone and speaking with the listing agent or homeowner and getting a quick answer. First, you submit the offer to the listing agent, they in turn submit the offer to the lender, the lender often times will then order an appraisal so that they know what the house is actually worth, then, they decide whether or not to accept your offer or counter back and all of this can take weeks to months to finalize depending on the experience of the agents on both sides of the transaction and how much work the seller did before receiving the offer. When your offer is approved or countered by the lender, you have to then turn around and submit it to your own lender in order to secure funding. Each lender is different in how they handle the process which is why the short sale process is so frustrating to most people. Some are quick, some are slow, some require a TON of paperwork, and others require less. This is why it is so important to find an agent that specializes in short sales. One little mistake can set the entire process back weeks so make sure everything gets done right the first time!
Another thing to remember when purchasing a short sale is that they are typically being sold “as is.” This means that you are agreeing to purchase the home in its current condition without the option of negotiating for any repairs. Some short sales need some fixing up and others are in very good condition, it just depends on the seller’s situation. It is important to keep in mind that the bank will generally not approve any repairs to the house so you need to account for the cost of those repairs after you buy it.
This about wraps up the short sale buying process in a nutshell. I hope this has put some of your minds at ease about buying short sales because they are a great way to get a good deal on a house. And just remember, align yourself with an experienced agent who specializes in short sales and don’t be in a rush!!!
To Come: Part 2: The Ins and Outs of Selling a Short Sale