Short Sales for Buyers
So, you’re looking for a home and you keep hearing “Short Sale”, “Possible Short Sale” or “Short Sale Approved”. Maybe you’re looking for a short sale, or maybe you’re wondering “What the heck is a short sale?”
If you read my explanation on the Short Sale page you know. Otherwise, here it is again.
Simply put, a short sale occurs when a lender(s) agrees to accept a lower sale price than the property is worth. Example: Seller owes $200,000, fair market value for property is $150,000. If the lender(s) agree to accept the $150,000 price, you have a short sale. Sometimes the difference is “forgiven”, sometimes a payment arrangement between seller and lender is reached. This is not an option just because your home is worth less than you owe. The seller must have an actual hardship which would otherwise place the home into foreclosure, and the seller would most likely be required to use any and all assets as required by the lender.
If you’re looking at buying a short sale, there are several things you MUST do to be prepared:
- Get Pre-Approved for a mortgage! Again, Get Pre-Approved for a mortgage! The bank will not look at your offer without a Pre-Approval, preferably from a well known reputable lender. This goes for all you hopeful foreclosure purchasers, too. Do not waste your time without this document.
- Be willing to provide “proof of funds” if you plan to offer cash. Again… do not waste your time without this document.
- You must be willing to make a reasonable offer. Ridiculous, “low-ball” offers will not be considered. However, you may not receive the notice of rejection for a long time. Then you have waited a very long time for nothing.
- You MUST be flexible on closing dates. You may submit an offer and have a very long time until closing, or it may happen with very short notice. Be ready for anything.
- Be prepared to act and spend money on a home inspection, appraisal or any other fees or services needed to be completed up front. You should plan to spend these even before the bank has given the short sale blessing. It doesn’t make sense to wait weeks or months for approval only to find out that you are unhappy with the inspection and do not want the home. You are then back where you started with a lot of wasted time.
- *** Most Important*** You MUST bring an excessive amount of patience, understanding, flexibility. A very good sense of humor is not required, but highly recommended.
Using a real estate professional who is well informed of how short sales work will greatly improve your chances of making the purchase work. You need someone on your side who will keep up will follow up with diligence and maintain consistent communications with the listing agent, to drive results.
Entering into the purchase of a short sale should be done with realistic expectations, if you wish to reach a successful outcome. Evaluate your needs carefully to decide whether this option is right for you.