Hi there, readers. I hope you had a fantastic Independence Day weekend.
Today’s post is focused on home buyers and, specifically, those that are interested in purchasing short sales.
First of all, let’s define just what a short sale is. In real estate sales, a short sale is a situation where the property market value is less than the outstanding loan against it. Depending upon the circumstances, the lender may approve the sale of the property for less than the loan amount and they are very much involved in the sale price approval.
Just to clarify, a short sale is not the same thing as a foreclosure property. In a foreclosure, the bank has already taken back the property. In a short sale, the owner is attempting to negotiate a sale price that the lender will agree to.
A few years back, there were more short sale properties in the KC metro than a buyer could shake a stick at. Due to a steady rise in home sale prices since then, buyers see much fewer opportunities for this type of purchase than before, but there are still some out there.
It has been my experience that buyers that purchase short sales fall into two categories. The first are the buyers that found a home they liked and it just so happens to be a short sale and the second are the buyers that only want to look at short sales. While we all like to get a good deal, there are some considerations to take into account on short sale purchases.
#1 — Are you handy or do you have the resources to manage repairs?
I ask this because the home will be sold “AS IS”. The seller/lender will not be making any repairs or providing cash in lieu of repairs. Because of this, it will be on the lower range of market price depending upon the condition and any repairs required. The good news about a short sale versus a foreclosure in this regard is that you will at least get a seller’s disclosure stating the condition of the home and what, if any, updates, repairs, or adverse conditions exist. You wouldn’t have that in a bank-owned scenario. This coupled with the buyer hiring a licensed inspector to evaluate the property top to bottom should provide some idea of what needs attention and to what degree . Armed with all of that, the buyer can get estimates on repairs or materials needed and then decide if this is a deal after all.
#2 — Are you in a hurry?
On a typical sale (one that is not a short sale), a buyer can reasonably expect to take possession of their home within 45 days after the contract has been accepted. This is not the case at all on a short sale. Even though the seller may sign your offer, expect months to go by before you even hear back from the bank. The lender will assign the property to a processor who is working on numerous offers in their assigned region. Your buyer’s agent won’t be able to do anything to speed that up aside from making sure all paperwork submitted is complete and accurate the first time. Ditto for the listing agent.
#3 — What if you don’t want to wait any longer?
Buyer’s agents assist with finding homes, knowing markets and negotiating, but we also want to protect our client’s earnest money. In a short sale, you want to make sure that you have a reference in your offer paperwork that you can cancel the contract if you have not received written acceptance of your offer from the lender within a specified period of time and that your earnest money will be returned to you.
So lets say that you submitted your offer and 6 weeks have gone by with nothing from the lender (not at all uncommon by the way). Problem is, your circumstances have changed and you need to be out of your current residence earlier than originally planned. By having addressed this, you can have that deposit returned to you to be used in your next offer.
I hope this has been helpful for you. There are many success stories on short sales for those in a position to wait it out. Don’t hesitate to call me with any questions you might have.
Realtor — Domicile One Realty
Licensed in Kansas and Missouri