What You Need to Know About Short Sales
You may find yourself tempted to consider short sales when purchasing a house. The seemingly small list price on a short sale creates the allure of a bargain, a steal of a deal. But that’s not always the case, and short sale transactions can be chock full of delays, problems, and set backs. Here’s what you need to know about short sales in real estate.
What is a Short Sale
A short sale of property takes place when the owner must sell the property for less than what is owed. Short sales are a last ditch effort before foreclosure.
It’s Not Up to the Seller
Contrary to the “for sale” sign and the listing price, the decision of accepting an offer on a short sale is not up to the seller alone. In fact, the bank – or banks – involved must also approve the transaction since it’s the lenders that are taking the financial hit. The banks, at this point, know that they’re losing money. The question is, how much are the lenders willing to lose?
Before the seller can submit a short sale to lenders, he or she must first submit a short sale package or a collection of documents supporting the need for the short sale. A short sale package typically includes a hardship letter from the seller, tax returns, payroll stubs, bank statements, etc. If the owner hasn’t complied by providing the documents, this can hold up the process even more.
A Waiting Game
If you’re in a hurry to move, excited about purchasing a house, and have a fire under your feet, a short sale is not the way to go. In fact, the short sale process can take several months at minimum, or drag out indefinitely until someone pulls the plug on pending offers.
Multiple offers on any house can be stressful for buyers, but multiple offers on a short sale wreak havoc. The first offer made on a short sale is usually below the asking price. The second offer tends to be at asking price. The third offer is slightly above list price, and the fourth offer is competitively well over the list price. Although listing agents are not required to disclose the details of multiple offers, it can help for you to know how many offers are already on the table. And, it’s possible for anyone to submit an out-performing offer at any time, which would bump you out of the game. Where short sales are concerned, you have to know going in that it’s a gamble, not a sure thing.
Having multiple lenders involved can create tricky timelines because one lender may accept a deal with a deadline while the other financial institution takes their sweet time to come to terms. But they must all agree within a certain time frame, or the deal is off. This conflict could create a scenario where you’ve got only days to come up with deposits, inspections, and other tasks related to buying a home.
The Costs of Neglect
When a homeowner realizes they’re in the final stages of losing their home, they tend to lose interest in maintenance and repairs. In some cases, the owners get downright rebellious and inflict damage. By the time you take possession of the house, there’s no telling what may need to be repaired or replaced. So make sure that when you go into buying a short sale, you’ve got the extra funds to fix the house you buy.
Short Sale Specialists
Whenever you’re buying or selling real estate, having the right real estate agent is crucial. However, when dealing with short sales, it’s critical that you work with an agent who is experienced in handling short sale transactions. Trust the agent to do their job and be patient with the process. You know it can take months on end to process a short sale, so there’s no need to hound your agent with obsessive phone calls to inquire about whether or not your offer has been accepted.
Can a short sale be a bargain? You bet! In fact, if the house you buy as a short sale were in good standing and good condition, it may not be affordable. Buying a house while it’s in poor conditions financially and physically could turn a healthy profit down the road. But there are no guarantees of acceptance, and it’s a lengthy process, so make sure you’re in it for the long haul.
Your real estate agent is the best source of information about the local community and real estate topics. Give Charlotte Trone a call today at 505-350-0099 to learn more about local areas, discuss selling a house, or tour available homes for sale.
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