You’ve entered the real estate market to purchase your next home. You’re looking for a great deal and you’ve heard about short sales. The siren’s call of a home on the cheap offered by short sales is a very loud song indeed. But do you have the patience and time to wait for a short sale to come to the closing table?
Here are a few of my thoughts and some pointers about short sales that my clients have found useful in their home buying process.
Opportunity Favors the Prepared Mind
With nearly three quarters of all short sales never reaching the settlement table (Campbell Communications Survey February 2009), it simply shows the struggles both buyers and sellers are having in closing short sale properties. As a buyer in today’s real estate market, you will need to be prepared to see your short sale purchase through to the closing table.
As a buyer of a short sale property you will need a reserve of patience to see the process through to the end. In many instances a short sale purchase can take one hundred and eighty days to resolve (six months). One of my recent purchasers successfully closed a short sale in ninety-five days. That’s ninety-five days from submitting the offer to sitting at the settlement table! And that was considered a short period of time…
95 Days is About 3 Times as Long as ‘Normal’
My buyers were in the fortunate position of having their current housing needs met, so they were prepared to wait six to nine months, if needed, to purchase this particular home. If you need to be in a home within a certain period of time, say under six months, do not consider a short sale home purchase. By chasing a short sale home purchase with a hard deadline for your housing needs, you could be boxing yourself into an impossible situation, or setting yourself up for a double move.
If you have the time to consider a short sale as your next home, be sure that the home you write an offer for is “the one” for you. My buyers fell in love with this home the instant they walked through the door. Because they were able to be patient and not fret over their current housing situation, they were able to peacefully bide their time as their offer made its way through the bowels of the bank’s decision making process.
Still Want to Purchase a Short Sale?
Here are a few more common issues that you may run into when purchasing that great, short sale deal:
- Purchasing Through the Listing Agent
Be sure that your interests are represented in ANY real estate purchase. It may seem logical that by working with the listing agent you might get a “better deal” but think about the agent’s initial fiduciary responsibility. Their initial responsibility is to the seller…not you.
- Costs of Inspection, Appraisal & Mortgage Application Fees
Be sure that your purchase agreement for a short sale contains a clause that stipulates that your mortgage application, appraisal and inspection all occur after the seller’s bank gives their approval.
- Initial Price to Offer on a Short Sale
Many lenders will require that a home offered as a short sale initially be offered close to the mortgage amount left on the home. This means that homes offered for sale short may be over-priced. This means that you need to make sure you are not overpaying for a home. Your lender will order an appraisal to determine the value of any home you purchase with a mortgage. This appraisal will also act as an insurance policy against overpaying for a home. In addition, be sure to work with an agent that will research the market and comparable properties prior to putting an offer together. Also, be sure your agent can explain their methodology to you on how they arrived at their suggested initial offering price.
- Bank’s Response Taking Too Long
When you are crafting a purchase agreement on a short sale home, ensure that you have the ability to walk away from the contract if the bank is taking too long to respond. It could be as simple as specifying a date when you expect a reply from the bank or a clause specifying a date by which the bank’s approval of the short sale needs to be completed.
Purchasing a short sale can be a long, frustrating process. By working with experienced professionals, you place yourself in the best position to close a short sale.