Top 10 Things To Know About Short Sales
1. Understand the Rules of Negotiation. An offer on a short sale has to be accepted by both the seller and the lender, which means there's an extra layer of negotiation involved. If there's more than one loan, the process gets even more complex. Both lenders will need to feel that they are benefiting from the sale before they will agree to it.
2. Work with a Real Estate Agent Who Has Short Sale Experience. Short sales take a lot of time, patience and skill. There are a lot of details and the process can be complex, so you always want to work directly with an experienced agent.
3. Work with a Lender Who Has Short Sale Experience. In addition to an experienced real estate agent, you also want an experienced lender, like Natalee Davenport of Service First Mortgage. She knows all the intricacies of short sales transactions and can help ensure the process is as smooth as possible.
4. Know That Short Sales Take Time. One of the most difficult parts of purchasing a short sale home is the patience it requires. After an offer is made to the bank, it can take anywhere from 1 to 60 days to receive a response. Lenders will receive offers and then present them internally to a committee or a decision-making authority figure. Either way, it will take time before your offer is reviewed. If you're looking for a quick close, short sales are not for you.
5. Have Realistic Expectations of the Price. Banks and mortgage companies have their own team of real estate professionals who will evaluate market prices and know what a property is worth. While you're allowed to make any offer you want, banks aren't always going to accept if they think you're low-balling them. It's also important to remember that you may not be the only one making an offer. A real estate agent can help advise you on a price that's a great deal, but still competitive enough to be accepted.
6. Have Realistic Expectations for the Negotiation of Cost. Ask up front whether your lender will pay closing costs, because not every one will. Each bank has their own guidelines so it's important to know the details before you write the contract. Your real estate agent can also verify limitations with the listing agent. The banks aren't always upfront with the information, but it's best to know in advance if possible. Lenders generally won't pay for items that sellers traditionally pay, like home protection plans and inspections.
Note: if the seller has a FHA mortgage, HUD will not reimburse lenders for closing cost paid by the seller on a short sale. If the lender allows closing cost paid for the buyer, FHA will not cover that part of the cost of the insurability/ reimbursement of the loan back to the servicer.
7. Have Realistic Expectations for Inspections. The purpose of an inspection with a short sale is to ensure that the "big stuff" is functioning properly. Ensure you're comfortable purchasing the property in the "as is" condition for the offer you make, understanding that any required upgrades are on you. See #8 for more details.
8. Know the Rules for Repairs. In most cases, lenders holding onto distressed properties won't do any repairs. Buyers are asked to purchase the property "as is", which means the buyer is on the hook for repairs.
9. Understand What Is Needed for the Lender Appraisal/Inspections. All the utilities need to be on when the appraiser goes to the property. If the appraiser arrives and utilities aren't on, a return trip will be charged to the buyer. Also know that an appraiser can't turn on water at the street or to a hot water heater, nor can he turn on electric via the panel box.
10. Have Realistic Expectations for Closing Timeframes. After a contract is accepted, it usually takes a minimum of three to four weeks to close. There are a minimum of 10 companies or positions involved in a short sale transcation, and it's important to understand that it takes time and is truly a team effort.