We have received a lot of inquiries about short sales. The question is usually “Are short sales worth the headache?” Whether or not the process will be a headache all depends on who you are working with. An agent who’s never done a short sale might make the process more painful than necessary, while one who has at least done a handful of short sales will be prepared for the transaction and understand what’s involved.
Just because it is called a short sale doesn’t mean it will be a quick transaction …
A few things to know before becoming involved in a short sale purchase:
- Don’t assume that the home is a bargain. Some agents deliberately offer the home at a discounted price to ensure lots of offers and “overbids”. Before you get excited about a bargain have your agent run a comparable sales analysis to find out what the home’s true market value is.
- What status is the home in? Has foreclosure already been filed?
- Who “owns” the loan – homeowner/seller or lender? Is there more than one loan on the home and what are the loan balances?
- Have your agent ask if any offers are currently on the table or have any previous offers been rejected.
Know the Process:
- With your agent’s help, determine value and decide on your offer price. Discuss with your agent the highest price you will go to should the bank counter your offer.
- Understand that although the homeowner/seller may accept your offer, the note holder/lender may not agree, and counter at a higher price.
- Just to make make it more interesting the Lender may completely ignore your offer. Sometimes they go the easy route and just pick the best offer on the table - so don’t always expect a counter.
- Make the offer contingent on the lenders accepting your price. Also include in the offer as much information as you can to prove to the lender you can afford the home. (ie. Pre approval letter, down payment amount, etc.)
Finally ~ Protect Your Rights
- Place a time limit on your offer to the lender. Many times the lender will drag their feet in accepting an offer in hopes that a better one may come along before they accept yours.
- Make sure to put in the offer that the purchase is contingent on you being able to have a home and pest inspection performed on the house.
Written by Shawn McDonald.
4 responses so far ↓
1 Jayson // Feb 18, 2008 at 8:50 pm
Short sales can be tricky and it’s a great idea to hire an agent that has experience in dealing with a short sale if possible.
Your point about proving to the lender that you can qualify for the loan is important - this is a major concern for banks because they don’t want to miss a deal.
2 Alex Wang // Feb 19, 2008 at 9:30 pm
Knowing that just because it’s a short sale doesn’t mean your going to get a great deal is something the general public needs to know.
Great post!
Alex
http://www.RealEstateRain.com
3 Kathy Drewien // Feb 21, 2008 at 4:14 pm
Whew! What a timely article for me! I’m working on a short sale now and your post was just the thing I needed to make sure the bases were covered.
4 Look Who’s Talking San Diego | Redfin San Diego Sweet Digs // Feb 22, 2008 at 7:49 am
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