Ø A “Short Sale” has nothing to do with the amount of time it takes to buy one of these properties
Ø A “Short Sale” has everything to do with the fact that the Seller (a normal person just like you) owes more money against the property than it is worth.
Ø The Seller is asking his bank or banks to take less than what they are owed or “short money” and allow the him to sell the property. Even though the bank does not own your property this gives the banker a tremendous amount of control over the sale.
Ø The dangers of this type of purchase for you are
o Most banks take a very long time to decide, anywhere from 3 weeks to 9 months, to take less than what they are owed because that have things to consider like
§ Will they be able to write off the loss on their taxes?
§ Or will they be able to get a payback from the Short Seller in the form of some cash at closing or a deficiency judgment after closing or both?
§ Will they be able to give the owner a 1099 for their losses, causing him to pay IRS?
§ Will they get any TARP money from the government if the approve the short sale or do they need to take it back at foreclosure to get taxpayer funds?
o What properties will you miss while waiting for the bank to decide? Should you continue to look and write offers?
o Will the bank come back and ask for more money or change the terms after you wait all this time? Sometime they do that…
Ø Don’t be discouraged, recently there are some new programs that have come into play that should streamline the short sale process…the HOME AFFORDABLE FORECLOSURE ALTERNATIVES (HAFA) and the HOME AFFORDABLE MORTGAGE PROGRAM (HAMP) And several banks has come to discover that allowing the owner to Short Sell is still better than foreclosure.
Ø Some Short Sellers price their properties really low to create excitement and get lots of offers. This is good but could cause a problem later getting the sale approved if the appraisal comes in a lot higher than the price agreed to.
Ø Short Sale properties are generally in better condition than foreclosures, as the owner is still living in and caring for the property.
Ø Generally a Short Seller will only consider one offer at a time so you will negotiate in a more normal way.
Ø Most times you will be asked to purchase the property in its “AS IS” condition as the Short Seller does not usually have money to do repairs.
o Remember the Short Seller is at the mercy of the Bank and does not control the sale,
o but typically appliances, fixtures and equipment do not get removed during the sale process
o and the property is generally in the same condition as when you originally viewed it.
Ø Always get preapproved, even if the Short Seller is willing to consider an offer without a preapproval, the bank will not consider the offer without a preapproval.
Ø Do not try to do this on your own, select a REALTOR® with experience and training, with whom you are comfortable.
o You are better off not using the listing REALTOR who is listing the property as he or she represents the Short Seller not you.
o Writing a short sale offer requires a lot of contingencies to protect you during the long process to approval and that takes a professional.
Ø Do not fall in love with a Short Sale property
o They take a longer time and you may not get a particular home...
o Be prepared to look at several properties at one time and select several that would work for you
o Write offers on all of them that will work for you
o Make sure there is an “escape” clause in the offer so that if more that one of your offers is accepted you can opt out of the deal, thereby selecting the property you like best of the ones that work for you.
o Since it takes so long for Banks to respond don’t stop looking and don’t stop writing offers until one of them responds to you.
I understand that sounds difficult…
I wish it were different but it isn’t…
Remember the goal is to purchase a home and get the best deal possible!
Hang in there and while you are at it consider foreclosures…normal sales…and new homes….
BUT WHATEVER YOU DO IN THIS MARKETPLACE…PLEASE USE A REALTOR!