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Roberta Burish's Blog

By Roberta Burish | Agent in Manatee County, FL

Short Sales: 6 Things To Look For Before You Leap

Short sales in today’s real estate market are all too common. Because they are often attractively priced, short sales can be hard to resist when you’re a buyer. Before you do anything rash, pick up the phone and call your real estate agent. Your agent has the means to thoroughly research that property, thereby giving you all the information you need before going any further.

It’s important to note that just because a home is listed at a short sale price doesn’t necessarily mean that it will go for that price. All short sales are subject a the lender’s approval, which means the price is subject to change.

Here are 6 things you need to consider before making a move on a short sale:

Comparable Sales For That Short Sale House

Have your real estate agent look up prices on comparable houses in your area. Are they going for more or less money? Also, because short sales are subject to a lender’s approval, the wait time for a short sale to process can take anywhere between 2-4 months.

Some short sales are priced ridiculously low. So low that the sellers’ bank will never accept them. Listings like these are likely to get multiple offers. If you have your heart set on a particular short sale property, your bid will need to be at or near market value. If you’re not prepared to pay above an inflated price on a lowball short-sale listing, then it would be wise to move onto the next property.

Mortgage Amounts, Number of Loans and Lenders

Ask your agent to research how much is owed against the home and find out the number of loans that are recorded. A second or third mortgage lender will receive peanuts as compared to the amount a senior lender in first position will get.

There are also some lenders out there that have a reputation as being difficult to work with. If your agent is an experienced with short sales, he or she will know who these lenders are, and can advise you of the difficulty you may encounter.

If your offer is 20% or 30% of the mortgaged amount, it is unlikely that your offer will see the light of day on the negotiator’s desk.

Short Sale Listing Agent’s Track Record

A listing agent who is advertising a short sale but has never closed a short sale is a risky proposition for you. That’s because it’s up to the listing agent to submit the short sale package to the lender and negotiate. Your buyer’s agent can’t talk to the bank.

Some listing agents hire outside companies to do their job, and the results of those negotiations are sketchy at best. Ask yourself, do you want to risk rejection of your short sale purchase because the listing agent has no experience?

Short Sale Seller Qualifications

Find out if the listing agent has received a completed short sale package from the seller, and ask about the contents of that package. A complete short sale package consists, at minimum, of the following:

  • Sellers’ hardship letter
  • Tax returns
  • W-2s
  • Payroll stubs
  • Financial statement
  • Bank statements

Some sellers do not want to cooperate and are slow to return these documents. Others have never been told by their agent that these documents are mandatory. You don’t want your short sale purchase delayed because the listing agent doesn’t have the required documents.

Number of Short Sale Offers Received

Homes that are priced under market value will receive multiple offers. An agent is not required to disclose the terms of those offers, but you are within your rights to know how many offers you are up against.

Here’s how it generally works:

  • When a short sale home first comes on the market, the first offer will most likely be a tad below list price.
  • The second, at list price.
  • The third offer will be slightly higher, maybe by a $1,000 or $2,000.
  • The fourth offer will be significantly more.

The trick is to make an offer that will beat the competition, yet still be below market value.

The Listing Agent’s Short Sale Procedures

Although REALTORS are required by the REALTOR Code of Ethics to treat everybody fairly, not every agent is a REALTOR. This means the short sale listing agent may decide to submit only the first offer to the bank and withhold all other offers.

Withholding other offers could be considered to be a violation of the fiduciary relationship formed between the listing agent and the seller. The seller is entitled to receive the highest and best price. Realize that even if your offer is submitted to the bank, as time marches by while waiting for short sale approval, another buyer could outbid you.

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