5 Things You Need To Know About Short Sales Before You Jump In
Everyone’s heard about them, relatively few have the facts straight. Briefly, a short sale is a home that the owner is hoping the bank will accept less than is owed on it. If you are thinking about buying a short sale you need to know these 5 things to start.
1. The asking price has nothing to do with what the bank will accept.You can offer full price, wait 4 months and have the bank counter tens of thousands of dollars higher. Routinely, short sale listings are listed at market value and then there is a series of aggressive price reductions until an offer is generated. Many times this is to hold off the home from being foreclosured. The bank will usually extent the foreclosure date if there is an offer.
2. You can’t know if the seller even qualifies for one. Not just anyone can do it. Just because a seller is upside-down doesn’t mean the bank will take less. They have to show a hardship – loss of job, transfer, death, medical problems, divorce, etc. They can’t have other assets – they need to be broke. You are not privy to this information when you make the offer.
3. It can take forever. The short sale process is not standardized, at all. It varies wildly between banks. The time range for approval is between a week and a year. No kidding. Shelf-life for most buyers seems to be around 3 to 5 months before they lose patience and move on. If there’s a first and a second mortgage it will take longer almost every time.
4. Not all “short sale specialists” are created equal. Some listing agents don’t have a clue what they are doing. Even if your buyer’s agent is just a whizz bang of an agent, they can’t control things like whether the listing agent sent the bank a complete packet which is crucial, or how and when they communicate with the lender.
5. Some short sales are not even good deals. As part of the acceptance process, the bank will have the house appraised. The appraisal is supposed to come in at market value. The bank will counter at the appraised price. Where’s the deal in that? You can pay market value for any house, why jump through the short sale hoops?
Is there an upside at all to short sales? I think so. Learn to stack the deck in your favor.