The market has picked up and more buyers are out looking for homes, my job is to help guide those buyers and homeowners who are selling their homes ! I want to touch base and give everyone a quick refresher on what a short sale is and what the process actually is, there are still quite a few leftover on the market and new ones coming onto the market.
What Kind Of Short Sales Are There On The Market ?
- Approved Short Sales: This is where the bank has already set a price that they are willing to take for the home. These kinds tend to move a bit quicker since the "negotiations" have already taken place, unless you plan on submitting an offer below asking price. These can usually close within 90 - 120 days after going to contract.
- Un-Approved Short Sales: This is the less predictable short sale because not only has the bank not agreed to a price but more than likely the homeowners are still in the process of submitting all of their paperwork as well. Normally in order to submit your offer to the bank you will need to provide them with contracts, which means you will need to use your down payment to get into contract.
What Is The Process Of Purchasing A Short Sale ?
- Meeting with your buyers broker, deciding on your offering price based on the actual market value of the home. Take the time to review how long it has been on the market, and for your own knowledge what the Lis Pendens is on the home.
- Presenting the offer to the homeowners, ideally they will accept the offer or counter. You can sometimes ask the homeowners to do fixes or repairs as well, but your agent will advise you to if this will help or hurt your chances.
- Once you have an accepted offer from the homeowner, you will than go into contract on the home. Your offer will now be submitted to the bank for their approval this is where the timeline becomes less predictable.
- The bank will send out their own appraiser to perform a BPO of the property. This is where they will go look at the condition of the home, and of the surrounding comparable homes. This is why basing your offer on the current market value is key, if they see your offer is considerably less than it chances are they will not accept. Remember the bank does not necessarily have to counter your offer they can simply reject and you will need to re-start the process to change your offer.
- Hopefully you will have gotten your offer accepted or successfully negotiated with counters to get the home for the price your comfortable with. Your mortgage broker should have began your process of you obtaining your commitment so that all the attorneys can schedule the closing and get all of the necessary paperwork from the homeowners for their short sale to be complete for you to be able to close !
Truths & Myths Of Short Sales
- Myth: The homeowners have defaulted on the house and have not paid there mortgage.
- Myth: Anyone can short sale their home if they owe more than it is worth.
- Truth: The homeowners must have suffered some circumstance for no longer being able to afford their home, and are unable to make other arrangements with the bank.
- Myth: You can offer the bank whatever you want, they would rather sell it than hold onto it!
- Truth: The home may not be worth what the remaining mortgage is on the home, but on average the bank wants 96% of the market value of the home regardless of what they are owed.
- Myth: You can use any company to list your homes as a short sale!
- Truth: You can, but your home will not sell. You need to hire an agent and company that has worked on and with banks on short sales in your area. Only a knowledgeable agent will be able to properly handle a short sale, the reason their is a higher commission rate is because of the extensive additional work we must do.
- Myth: Whatever is left in the home the bank will come and clean out before your closing.
- Truth: What you see is what you get, literally this unfortunately includes whatever leftover debris is left by the previous owners. In the case where the homeowners are still in possession they will almost always take their belongings and properly dispose of what they are not taking with them.