With the recovery of the real estate market comes a reduction in distressed homes that are on the market. Thank goodness! Today (2/16/2015) we have 2,783 listings in our MLS area, of which only 81 are short sales.
I take comfort in the fact that fewer families are going through the tremendous ordeal of a short sale or the foreclosure process. This also means that bargain hunters have to look a little harder to get a good deal, with a lesser discount on the home. That said, this does not mean that the deals aren’t out there.
When sellers need to sell their home for less than they owe on their mortgage, they’re shooting for a short sale. Short sale homes can sometimes be bargains, but only if you do your homework, stay patient, and remain unemotional during the lengthy short sale process.
I dare say that most buyers do NOT last. They usually walk because they found a home that’s immediately available or it is in better condition, or maybe the bank came back insisting on a higher price, that the buyer is not able or willing to match.
If you do find a home that happens to be a short sale, it’s good to know what you are getting yourself into and to do some homework BEFORE you even submit your offer. I do extensive research BEFORE offering on any short sale for my buyers.
1. What’s this home’s fair market value? For you, the buyer, this means: Are you really getting a deal? – The bank will take a close look at other comparable sales as well. They are willing to take a loss, but they don’t necessarily want to give away the property. Rely on your agent to give you needed and valuable [sales] information.
Recently, my buyers offered on a home in my favorite area here in Colorado Springs. I don’t live there -though I should, as I am there almost every day of the week- but I have detailed knowledge on homes that sell in this area. I was quite surprised to see that this particular short sale was listed for above $300,000, not the fault of the Realtor. The bank, appraised this home for way over $300,000 – but I knew that buyers in this subdivision were able to purchase lovely, move in ready homes with the same or similar square footage for much less than the current short sale list price. The offer my buyers made was not accepted by the bank and the buyers moved on. In the meantime the list price has dropped by about $25,000. I believe that it’s a great house and with some sweat equity the home will shine and bring their new owners great value when they resell. In other words, just because the bank thinks it’s worth a certain amount, doesn’t mean they are right. You just might be better off to just leave it be and see what happens. If you’d like to know more about this particular short sale, please contact me.
2. Know, that you will make an offer to the seller and if he agrees with your offer he will sign, however, your offer will then have to be submitted to the lender – and THAT may take what seems like an eternity. Though depending on the lender, there are new rules as to how quickly the bank needs to get back with you. This timeline sometimes is kept, most of the time it isn’t.
3. Also be advised, that usually you can not expect any or only few improvements to the home. You definitely should conduct inspections to determine if the home is in good condition. Don’t expect the seller to be financially able and willing to make any improvements. Expect to buy the home ‘as is.’ Even then though, the lender might offer repair escrows. Ask about it.
4. In Colorado you’ll have to submit a Short Sale Addendum Form with your offer – explaining some of the nature of such a transaction. Here you can also determine whether you would like to be locked into the contract or if either party is allowed to be able to withdraw from the contract – both have advantages.
5. Once the bank accepts your offer, it will issue a short sale approval expressing the written willingness to accept the offer, and under which requirement. Once you receive the SSA (short sale approval) from the bank you can continue with your ‘regular’ purchase procedures, such as conducting your due diligence, locking your loan percentage rate, inspecting your home and so on.
6. Things change. Since I started “doing” a lot of short sales things have changed and each bank seems to work differently. Previously, there were no earnest money requirements of the buyers, NOW several banks have required earnest money with the buyers offer. There have also been instances where the buyer was required to complete and pay for an inspection even though it was not even clear if the bank will issue a short sale approval. Imagine you would spend $200 or $300 on an inspection, wait around for the bank to make up their mind, just to find out that the bank wants more money than you offered or you are willing to pay.
But wait! There is more…….
……to come, this is just the beginning! Don’t miss the rest of these short sale tips! Subscribe to my blog!