You’ve seen the real estate programs on television and hear reports on how you can snatch up quite a deal on short sale properties right now. Your eyes go glassy and you get distracted by the shiny new home you are going to get for a crazy good deal. Ahh, you’ve got it all figured out!
Well hold up a minute. There is more to the short sale process than just finding the right home at an amazing price. Short sales are very complex and complicated. It’s not as simple and lucky as finding an expensive golf club in a 50% off closeout sale. Seems like no two short sales are ever the same. But if you can hang in there throughout the whole process, you might just find the deal of a lifetime.
Here are some things you need to know before pursuing a short sale:
1. Look at the listing agent’s short sale experience and track record.
You need to speak with your buyer agent to make sure the listing agent is experienced and competent in dealing with short sales and has the ability to get them closed. If the listing agent has not done their homework you could be wasting your time with an offer. They need to qualify the seller up front.
2. Not all sellers qualify for a short sale.
The seller of a short sale must be in a distressed situation for the bank to even consider approving the sale.
3. The listing price doesn’t mean jack!
Buyers see the listing price on a property and think the bank has set that price and HAS to approve it. That is not the case. The seller and the listing agent set the list price. Some agents set the price well below market value just to make their phones ring. The bank typically does not even see what the property is listed for until they get an offer. The banks do their homework with appraisals and broker price opinions to make sure the price they are getting is fair market value. (This is part of why the entire process takes so long – the banks are doing their research.) If the offer is not at fair market value, the bank will counter at a higher price. Be sure to check out comparable sales in the area before submitting an offer. One situation I ran into this year was a bank that countered $50,000 over the asking price!
4. Be patient.
The seller accepting your offer is just the first step. You could wait 4-6 months or even longer for an answer from the bank. And like I said you may or may not like the answer you get.
5. Be ready for anything.
Banks have been known to ask buyers to pay past due HOA fees, tax liens, etc. Obviously these are not your responsibility and it is frustrating to have to bail someone else out of debt. But sometimes it can be worth paying them in order to get a property at a great price.
6. Get pre-approved or be prepared to show proof of funds.
Sellers and banks in a short sale situation will not even look at your offer unless you submit a pre-approval letter or proof of funds such as a bank statement, equity line, etc.
So don’t be afraid! If you decide to pursue a short sale, you have a complete understanding of what you can expect from the process. You can get a property at a great price if you understand how short sales work from the start.