Looking for short sale listings? Please visit my Short Sale listings page.
If you are considering buying a short sale property and want to learn what is involved, I hope
the answers to these frequently asked questions will be of assistance. Constant
communication between me as your real estate representative, the listing agent, and the
lender, is the key to a successful short sale transaction.
You can register for automatic updates from our MLS for short sales that meet your needs on
my Home Search page.
A short sale occurs when a property sells for a price that is insufficient to pay back the loan or
other liens against the property. The seller must prove financial hardship to their lender.
The seller's lender will not allow the seller to receive any proceeds or obtain any monetary
benefit as part of a short sale. They also will not allow the seller to make any repairs. A short
sale is usually as-is, subject to a home inspection by the buyer.
Let's look at the similarities first. Both require the use of an "as-is" purchase contract (see the
Document Center) to proceed with the sale if there are no major material defects.
Both short sales and foreclosures are considered distressed properties, and short sale
lenders often use comparable foreclosed properties to arrive at a sales price.
Short sales usually are currently occupied and more often than not, are better maintained than
Foreclosure properties have no seller disclosure as to condition. Since the majority of short
sale properties are occupied, the current owner is more likely to be living in the property and
maintaining it. If you are buying from long distance, this can make your decision easier.
However, with a short sale, there's no guarantee the seller will receive approval of the sale
from their lender at a price that makes sense in the current market. Each lender has it's own
requirements to qualify for a short sale. We are seeing a lot of short sale deals fall through
due to large past due amounts for homeowner association dues.
Great news! Starting June 15, 2012, a new U.S. government regulation will require lenders to
respond to a short sale offer from a buyer within 30 days of receipt. If a lender cannot provide
a response within 30 days, they must issue weekly updates to the buyer on the status of the
offer and make a final decision within 60 days.
If the lender makes a counter offer, the buyer has 5 business days to respond. From the date
of buyer response to a counter, the lender then has 10 days to accept or reject.
Even though the new federal law about short sale response time takes effect on June 15,
2012, it is still important that we set a time for approval of the sale from the seller's lender
(see the Document Center).
Closing/title companies and real estate attorneys have created an industry negotiating with
banks to get a quicker resolution on accepting short sale offers. They market their services
representing the seller's best interest to the lender. Some of these negotiators are better than
others. Hopefully, this industry will vanish as the new short sale rules take effect. These
"negotiators" are loosely regulated and add an unneeded layer to the entire process.
Some short sale negotiators, hired by the seller, ask that you as a buyer pay them a fee for
their service. I strongly recommend against this. The seller hired them, the seller should
pay them. However, as a buyer you do benefit from the seller's lender offering to pay some of
your closing costs, such as owner's title insurance and title search fee.
You will also want to have a letter from your lender showing clearly that you are qualified to
purchase a property in the sales price range. This is different from a pre-qualification letter.
The seller's lender wants to know that you are 100% approved to buy the property before
considering your offer.
If there are past due HOA fees or any kind of lien against the property, the seller's lender is
usually responsible for payment, and will convey clear title to you at closing.
I work with a local lender and real estate attorney as part of my short sale services here on
my Service Providers page.
|Download the following PDF
files for more short sale
I gave an answer on Trulia which was voted the best answer on short sales. Realistic
expectations for buying a short sale means that an offer to purchase does not automatically
result in an agreement and a closing.
If you are serious about buying a short sale, you should not be concerned about paying at or
slightly above list price. View my analysis of list price versus sales price for short sales in
my 3-county area here on Google Docs.
It's human nature to have an aversion to paying list price. Everybody wants to tell their family,
friends, and co-workers that they got a great deal. You have to put those feelings aside when
buying a short sale. A short sale is already a great deal.
You can make a low offer, but, in my opinion and based on the data above, you will be
wasting your time if you are not willing to pay a higher price based on current market
conditions. Almost every short sale that falls through because the buyer wouldn't pay a
higher price, is re-listed with a bank approved price and sells quickly. Hindsight is 20/20,
and in this market, it's also the higher price you will pay for a similar property at a later date.
You may find this article helpful.
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I will create a search in our MLS based on your criteria. You will receive email notifications
automatically for short sale listings that meet your needs. The best properties go fast!
If you are an investor, you may find my real estate return on investment calculator handy.
Whether buying or selling, we'll look at comparables, including nearby distressed property
sales. I can help guide you through the process.