Do you plan to buy a new home? Are you eyeing houses that are on short sale to fit your tight budget? Prior to deciding to offer on a short sale, you need to carefully assess the sellers' situation.
When a home is in short sale, it is being sold at price usually lower than the amount owed to the lender. The seller also does not have other means to pay for the borrowed money; hence, the short sale. A lot of factors can be associated to this situation and these would include: getting laid off from work, divorce, unexpected medical bills and the downturn in home values.
You need to know that short sale is not the same as foreclosure. In the latter, the title and the rights to the real estate have already been granted to the lender. The best solution for homeowners to prevent foreclosure is to short sale their home. Although it sounds promising to the seller, you need to know that there are also some drawbacks for the buyers. You need to take some of these into consideration before you decide to offer on a short sale. If you are really in no doubt that you want to write an offer, then here are some points that you need to know.
•· You need patience to wait for the completion of the transaction. In purchasing a home that is for short sale, the agreement between you and the seller is not enough to close the deal. You still have to wait for the go signal from the lender or the lenders. The average time for approval for a short sale with one mortgage is two months. For more than one mortgage to different lenders, it could take three months or longer.
•· You should be ready with your cash. For you to receive immediate approval from the lenders, you need to prove that you have enough funds to pay for the short sale. Your chances of approval from lenders will be higher if you present a larger amount for down payment and have a pre-approval letter with an expiration date at least 3 months in the future.
•· You should write a "clean" offer. Lenders do not like buyers who cannot completely commit on the short sale. A subject to sale contingency will probably not be accepted.
If you think that you are ready to offer on a short sale, then you should consult a qualified Realtor. When looking for a qualified real estate professional, they should be able to present you with a list of homes for short sale, assist in the process of negotiation, and communicate with the lender appropriately.
When buying a property on short sale here are some of the problems that you should be ready to face.
•· Buyers should be ready with possible rejection from lenders. The price a lender is willing to accept can often depend on the expertise of the listing agent. The lender will require a copy of the listing history showing that the listing agent has made every attempt to cover the mortgage debt. They want to ensure that the price has been decreased steadily over a suitable period of time. If your offer is too low, the lender may reject the offer outright - although we would hope they will counter offer.
•· The seller could at the last minute reject the short sale. The lender might suddenly ‘move the goalposts' on the seller. An example would be expecting the seller to take out a loan for the deficit. In a case such as this, the seller might decided to let them foreclose.
•· Buyers will not be allowed to request for repairs. Since the property is already offered at a low price than its real market value, lenders normally will not allow any requests for repair. The property will be given to the buyer as is. No improvements and repairs will be done as this could cause additional expenses to the lender.
Keep in mind that short sales involve a lot of risk, and you need to take into consideration all of the sides involved in the short sale. This would include you or the buyer, the seller, and the lender. All terms and conditions should be agreeable to all the involved to make sure that the transaction is good.
The above covers some of the vast subject of shortsales. If you require further information, please contact the author.
Nigel Chapman, Certified Distressed Property Expert
515 321-8094 Nigel@RealEstateConcepts.net
Read all my blogs at www.DesMoinesBlogger.com
Nigel Chapman, Managing Partner, RE/MAX Real Estate Concepts, 550 36th Ave SW, Altoona, IA 50009. Each office independently owned and operated. Equal Housing Opportunity. Licensed to sell Real Estate in Iowa.
