Buying a Short Sale

WHAT IS A SHORT SALE?  A short sale is when the seller is selling the property for less then what is owed and the sellers lender(s) agrees to accept less then the full amount owed to satisfy the debt.  Other terms used for short sales are- pre-foreclosures, underwater or distressed properties.

Why would the bank accept a short sale? There are several reasons but the simple answer is…. it is cheaper then foreclosing on the home.  The banks are not in the business of owning, managing, and selling homes.

Are all short sales approved? No.  This is why it is critical that you work with an agent that truly understands the process and how to close short sale transactions.  Your agent must know how to structure the offer giving you the best chance of success.

How long do Short Sales take? Usually it takes 3 – 4 months from the time an offer is submitted.  It can happen quicker and it can take longer depending on the various parties involved.

Should I avoid Short Sale homes?  Maybe. If you don’t have the time to wait for a short sale to go through then you may want to confine your search to equity sales, bank owned foreclosures, and already approved short sales.

How does a Short Sale differ from a Foreclosure?  Basically, a foreclosure is owned by the bank and goes much quicker (Typically a 30 day escrow period).  Because the bank has acquired the property, they have no knowledge of the homes history and they are exempt from providing most disclosures to the buyer.  In a short sale (pre-foreclosure) you are working directly with the owner and you have the luxury of owner history and disclosure.


The Basic Steps To Buy A Short Sale

Interview an Agent:

The first step is always to hire an agent with experience in short sales transactions. Choosing the wrong agent will cost you time and money.

Become a pre-approved buyer:

Do you want to get the best house you can for the least amount of money?  Then make sure you are in the strongest negotiating position possible.  Price is only one bargaining chip in the negotiations, and not necessarily the most important one.  Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.

Locate, research, and make an offer:

Congratulations!!  You have found the home you want to purchase.  Now before you make the official offer to purchase, we/you need to do a little research.  You will want to research the area.  Depending on your family situation the nearby schools and parks may be important to you.  Are there any special assessments associated with this home (Mello-Roos)?  You may have some questions for the Homeowner Association.  Get the number and start to investigate.  Drive by the neighborhood on the weekend or nights and get to “know” the neighbors.

Your Real Estate Agent will assist you in researching the price to offer.  Running comparables is most commonly accomplished by pulling the past solds from the local Multiple Listing Service (MLS), and doing a comparison and averages of sold prices.

You will have an inspection period once your offer is approved.  However, a little investigation prior to making an offer can save you TIME and MONEY.

Seller Accepts Your Offer:

Once your offer is accepted, the listing agent submits your offer and the sellers short sale package to the bank for approval.  This takes time (approx 3 months) and patience is needed.  It is during this period the short sale lender may counter price and/or other terms of the contract.  We then respond based on how you feel about the proposal.

Approval comes from the bank:

Now escrow is officially opened and the transaction becomes rather normal.  We start the loan process, perform inspections, receive disclosures from the seller, and make sure you are happy with the property condition and terms.  The escrow/loan process usually take 20 to 30 days depending on several factors.

Signing Loan Docs and Closing:

About 3 to 5 days before escrow is due to close you will be signing your loan documents.  Once sent back to your lender they are reviewed, approved, and put in line for funding.  During this time, we will perform a final walk through of the property and arrange with the seller for the transfer of keys, remotes, and utilities.

On the day of recording you receive the keys to your new home… Congratulations!

Give us a call!  We are experienced and will be glad to help.  Steve (619) 370-3660