In today's market the circumstance of why a homeowner is selling is usually pretty clear by how the listing is written up, and with so many homes on the market you really do have plenty to pick from. The moment you find YOUR perfect home, is when you have to decide what to offer for the house but in today's market what you offer on a home will depend on what kind of sale it is! Are you dealing with a homeowner directly, will you need to have their bank involved, or is their numerous family members who will need to accept your offer. What kind of sale the home is will decide on how aggressive your offer should actually be.
With today's market filled with short sales I still find it odd than many buyers are unaware of what a short sale actually is. So first let me explain, a short sale is when a homeowner is under water in their home, and the bank is giving them the chance to get out from underneath it by allowing them to sell the home for less than what it owed to them. Many people seem to think that because a home listed as a short sale it means the homeowners have stopped paying their mortgage but that is not usually the case. Homeowners who continue to pay their mortgage can short sale their home, and could qualify for a new mortgage within a year of the process being complete!
Now when your putting in an offer on a short sale it is important to remember it will actually need to be accepted twice. The homeowner is up first, they can reject/accept/counter your offer but they are not able to make the FINAL decision. Once your offer is accepted by the homeowner, it will than be submitted to the bank who will either accept/reject your offer, and that is the final decision. Notice I didn't say counter, it was not by mistake the banks do not counter-offer.
Many people assume that because a home is listed as a short sale they will be able to "steal" the house, that happening is actually the exception not the rule. All banks will want to get fair market value for the home, so if the home is in move-in condition and has passed the home inspection you will want to make sure your offer is fair. The bank may respond quickly, or it may take a few weeks for them to get back to you. Before you put an offer in on a Short Sale your buyer broker will go thru the process of finding out if it had been pre-approved, if there are any other offers waiting for bank approval, and how many banks are involved.
My advice to those who have chosen that they want a short sale is to make sure that you submit your highest and best offer to the bank. You will spend time waiting to hear back from them, but it will save the time of resubmitting your offer if they deny your low-end offer.
Now if you are looking at homes that have been foreclosed on they are usually vacated already, and unfortunately are not always in the best condition. These are the homes where you can steal the house from the bank, but many times you will find the vandals have already stolen some important pieces of the home from the bank already!
Do not despair there are ways of buying a foreclosure, and getting a loan to rehab the home all at once. This is called 203K Rehab loan, it allows you to obtain a mortgage on a home that needs substantial work done before you are able to move in. You could also use this loan, on a short sale but it is commonly used with foreclosures.
Here again, the bank will either accept/reject your offer. You do have the ability to give them a time frame in which your offer is valid, but always be realistic many banks will take 2-3 weeks to get back to the listing agent, who will than inform your broker.
Estate sales are a wonderful way to get your new home for a great value. Estate sales occur when either the family member has passed away, or is no longer able to take care of themselves or home. Usually a family member will have been named the Executor/Executrix, and will be making all the final decisions.
The upside of this is you are not dealing with the bank, and you will have a response or counter offer in a timely manner. Most of these homes were maintained to the best of the homeowners ability. I have seen each end of that spectrum some homes that were completely updated to homes that made you think you had taken a trip back to the 70's.
The hardest part of an estate sale is being reasonable for you the buyer, and for the seller. Although the sellers may not have a mortgage on the home, many times the emotional attachment to the house is a driving force during negotiations. I have been on both sides of it, selling my own family members home I was utterly shocked when they began discussing what they would want credited off the price, because of the extensive remodel they would need to do to our original 1950's farmhouse. On the other hand I have come across other estate sales where because of the extensive remodel I have advised my own clients to offer less for a home.
When it comes to an estate sale you should move quickly, and use your Realtors knowledge of the market to your advantage. You will get a much quicker response with an estate sale so you have the ability to start at the lower end of what the home is worth and go up from there. If the home is already priced at the lower end you should move quickly, because even as a buyer you have your own competition - they are called investors and they love short sales, foreclosures, and estate sales.
Your probably wondering what kind of a sale an investment sale is and not many Realtors take the time to write about them. I happen to work very closely with my investors, and they have always been gracious enough to let me stay involved from their initial purchase thru renovations, and than allow me to re-list the finished product. The first rule of a good investor is too not have to hold the house for very long once the work is complete, which means they are not getting above market value.
In real estate there are many myths, the most common is that investors were able to purchase the home for pennies on the dollar, unfortunately that is not always the case. Your broker will be able to pull the record of what they bought it for since it is public record, and than you must figure in the time and labor they spent doing the renovations just because they bought the house for $150,000 and now have it listed at $250,000 does NOT mean they are making $100,000 profit.
There are some great reasons to purchase a home from an investor, one of which being that they have no emotional attachment to the home it is all a matter of business and numbers. Secondly, they got the house while it was a short sale/foreclosure which means you do not need to haggle with the bank or wait for a homeowner to move out in order to close sometimes saving yourself that time really is priceless. Of course, the most common reason to buy this type of home is the fact that it is completely updated from top to bottom. Most investors will put in hardwood floors, stainless steel appliances, tile backslashes, granite countertops in the kitchen & the bath, up-to-date cabinetry, and of course take care of any electrical & plumbing upgrades that were necessary. If you are looking for a updated home but do not want to pay for the price tag that comes along with new construction, a investment sale is the way to go.
When placing an offer on this kind of home you want your Realtor to go the extra mile BEFORE you put in an offer. You should know what they originally purchased the home for, and if they providing any sort of warranty on the work they did to the home. In this kind of sale again you have the ability to get a quick response so starting at the lower price point where you are comfortable is expected, but investors will be aggressive when countering so be prepared to get their final and best offer pretty quickly.
There is another aspect when it comes to deciding what you will offer for any home, based on which of the 3 categories its price falls into for that neighborhood: Overpriced, Fairly Priced, Action Priced. I will be taking the time to cover this in my next blog!
When you are placing an offer on any home you want to be sure that you educated on the market value of that particular home and decide what you are comfortable paying for the home. This blog was to explain the process of who will need to accept your offer, and typically what kind of "Offering Style" will help you get an accepted offer quickly !