With roughly 1 in 6 homeowners currently in some state of foreclosure, it is likely that the home you end up buying will be either bank owned or a short sale. In months past, most real estate agents would avoid short sales.They were very difficult transactions, took months to get approved, and frankly had reduced commissions. And although banks have committed themselves to “streamline” the short sale process, not much has changed.
A buyer can count on waiting weeks to months for a bank to approve a short sale. Not an easy task when you have made an offer on your “dream home”. But short sales are here to stay. So if you are currently shopping for a home, embrace the short sale concept and just keep moving forward.
Here are some things to keep in mind while out shopping:
- Don’t Stop Looking: If you have made an offer on a short sale property, keep on searching for something better. This goes against everything I previously believed in as a real estate agent. I wanted my clients to fall in love with a house and “have to have it”. But with an approximate 1 in 5 chance on getting a short sale approved, my strategies have changed. Find a great house and write an offer. Find a better house and write another offer. At some point, you will end up with an accepted offer on a great house.
- The Offer: Don’t waste your time writing a low-ball offer. With record low inventory levels and increased competition, you need to give them your best and highest offer right from the start.
- Price: It is important to know that most short sales are priced under market value. The listing agent does this to obtain as many qualified offers as possible. It is best to determine your offer price on the comparable listings and sales in the area.
- Contract Price: Don’t necessarily count on paying the price that you and the seller have agreed upon. Remember the bank is the ultimate decision maker in this deal. They will do a BPO(Brokers Price Opinion) on the home. If your agreed upon price doesn’t fall within a certain percentage of that opinion, they will not approve the sale. It is also very likely that the bank will try to re-negotiate the price and try to squeeze as much money out of the deal as they can.
- As Is: The term “As Is’ has new meaning in the current real estate market. In previous years a seller claiming on selling their home “as is” could still be talked into doing a few repairs or issuing a credit. Not today. It’s always good to ask, but don’t count on getting any help from the bank for repairs or credits.
- Short Sale Addendum: Your offer should include CAR form SSA(short sale addendum) and it should be indicated all time frames should begin AFTER the banks short sale approval. You definitely don’t want to be spending money on inspections or giving deposits to escrow before the bank has even approved the deal!
- Short Sale vs REO: It seems that every REO listing these days gets 10-20 offers on the home. Buyers that are planning on using FHA financing are generally out of luck. The banks are looking at the strength of the buyer in coordination with the price. Their hierarchy is generally: Cash offers, large down payments, conventional financing, and then FHA financing. So the FHA buyer has a tough time competing on a property with multiple offers. But in a short sale you may have more opportunity. Initially, it is the seller who decides on which offer is submitted to the bank. So a good realtor should do all they can to get in front of the seller(s) and compel them to choose your offer. Stories about your love for the house, nearby family, or friends that live on the street, can go a long way in helping persuade a seller.
As previously mentioned, short sales are here to stay. It is best to have a good realtor, with patience, to find you the right home. Enter the home searching process with the right mind-set of embracing short sales and you will end up with a great new home at a competitive price!
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Posted In Short Sales
This entry was posted on Friday, December 18th, 2009 at 12:03 pm and is filed under Short Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.