A short sale, in essence, is nothing more than a glorified term for a pre-foreclosure but with a twist. It's important to be able to recognize a short sale and what to expect when purchasing one.
What Is A Short Sale Situation?
A short sale situation occurs when a property owner has suffered a financial hardship and finds themselves unable to continue making payments on their home. To avoid a possible foreclosure the seller contacts the bank and submits a letter of hardship to let them know of their financial situation. In most cases, the lender is willing to consider accepting less for the property than what is owed on the mortgage under the assumption the property is listed at an appropriate price for a certain length of time. The banks will generally not accept extremely low and unreasonable offers when the property is first listed. They want to see that the home has been aggressively marketed at a fair price first and if it just won't sell then they start to consider lower offers.
Once an offer has been submitted to the bank it is very common that the bank will take anywhere from one to four (and sometimes longer) months to approve or reject your offer. The banks will not counter offer. They will either go with it or not. If you waited three months for a response and they said no, you have the option of either submitting a higher offer or walking away. Please keep in mind that the bank does NOT even have to respond to your offer at all. So you may want make sure in your contract you have some type of clause that states how long you are willing to wait for a response otherwise you could be putting your escrow deposit at risk if you decide to walk.
The bank usually either says yes, or no and typically there is no counter offer.
Depending on the attorney representing the seller and THEIR practices, decides wether or not you are informed of the descision of yes or no.. or if they accept your offer. My experience is that is if the attorney representing the seller (bank) is prepared to handle the transaction and communication all can go smooth. If the attorneys office is not prepared or uninterested ( as I find most to be) then the deal will just go to the first person that makes an acceptable offer.
Short sales most definately are a good deal... it is a tiring drawn out process, but if you have a good agent that knows how to handle a short sale all can go bumpy smooth. I have seen numerous homes go for 25 -30% off market value.
Find a Realtor that has knowledge.. experience knowledge.. (not late night TV you can buy a home for $300. knowledge) of short sales and the transaction will hav a better shot at surviving.
All of these are good answers.
In addition you need to look at your situation depending upon the listing agent and lender you can be in for a long wait.
If you have a specific time frame a short sale may not be right for you!
First thing your agent should ask is who the lender is and is there a second mortage.Now you are dealing with two loans.1st and 2nd,If there is a second then the two will negotiate who gets what.Find out if the second is held with the main lender this would be a good thing for you.
Second of all if the lender is Countrywide you are in for a long wait 6 months in some cases they are overwhelmed with subprime loans.
My suggestion to all short sale buyers is to continue looking at them and keep writing offers the first to accept will be the one you take.Its a risk the lender runs by dragging their feet and your best interests are being represented by your agent.
Keep in mind most banks will not accept an offer much lower than 10% off market value.Short sales arent this fantastic deal that everyone thinks they are.You may be much better off having your agent do a search of properties for you based on equity held by the seller.The more equity they hold the more reasonably prices their homes should be and will be selling at market value anyway.That puts you back in the drivers seat and not at the mercy of some third party.
If youre lucky the bank will counter offer you it's happening more often now but don't hold your breathe.
I wish you the best of luck.
If you have still concerns about your offer being presented, ask your REALTOR to prepare a sign off sheet for the home owner (seller) stating they have reviewed the contract and either rejected it, accepted it or are holding it as a back up offer.
If the sellers are already working with the bank on a contract, they might hold your offer as a back up. If this is the case, the seller's REALTOR should provide you with something in writing saying the sellers have not signed the contract, but will hold is as a back up offer.
The offer first must be accepted by the property owner, then the mortgage company. After the mortgage company or lein holder agrees to your offer, the property is considered under contract.
These questions should have been asked and answered before you entered submitted a contract .
Good luck with your purchase. Depending on one's circumstances, a short sale can be a great opportunity!
Keller Williams Atlantic Shore
I suggest that you contact your agent and ask where your offer is in the process at this point.
The banks are looking to get the highest price possible on a short sale. Generally they will hold out for the best price as well. Who submitted your offer? If it was a realtor, be assured that your offer was submitted (we don't earn a commission until the property closes). The banks have not been very fast to respond to offers....alot of red tape and paperwork is involved. As a buyer, be prepared to wait for awhile before hearing an answer back. The mortgage company will respond to your offer, not the seller. A short sale means that the bank is taking less than what the seller owes on the property, hence the longer wait on hearing about your offer. Keep in mind too, that a short sale property is one that you will most likely get a great deal on, but also one in which you as the buyer is responsible for all of the inspections and repairs that might be required prior to closing. The short sales that I have been involved in have taken 3 to 4 months to close.
I would be happy to help you in any way possible in regard to the purchase of a distressed property. Please feel free to call or email me anytime.
Debbie Bathen - RE/MAX Community