Buying a Short Sale
If you're thinking about buying a short sale it is imperative to spend time learning about the process. People are often under the impression this is the best approach for getting cheap homes, but this is rarely the case.
For the most part, buying a short sale leaves buyers at the mercy of the bank. Unfortunately, banks can change their rules throughout the negotiation process. They might ask for more money, demand property inspections and appraisals, and other items that increase the original purchase price.
Short sale properties include residential homes, commercial property, and vacant land that have entered into preforeclosure because borrowers defaulted on their mortgage loan. Banks allow property owners to list their realty through an agent at a price lower than their loan balance.
For the most part, it is less costly for lenders to accept a reduced pay-off than to commence with foreclosure. Short sales also let banks liquidate non-performing loans faster. This in turn, frees up funds that can be lent to other mortgagors to produce positive cashflow.
The biggest challenge buyers of short sale homes face is the length of time it takes to close the deal. Banks hardly ever accept the first offer they receive. Furthermore, there is high probability that several people will submit purchase offers for the same property.
It's never a good idea to try and low-ball the asking price. However, there are certain situations when it is worth trying to get banks to lower the price. If a property has been listed for several months and no offers have been presented to the bank, there is a chance that buyers can purchase the home for less.
Buyers ought to seek help from a short sale specialist that has a good record of closing deals on distressed properties. These kinds of sales are considerably more involved and require additional paperwork and good negotiation skills.
In most cases, short sales are handled by bank loss mitigators who act as a mediator between banks and homeowners. Since loss mitigators handle all types of transactions that involve delinquent loan payments it can take several weeks (or months) before an offer is accepted or rejected.
Buyers should be prepared to wait a long time before hearing back from the bank. Once the offer is accepted it can take several more months before buyers can take possession. According to RealtyTrac; an industry leader in real estate, the short sale process takes close to a year from start to finish.
If you're willing to wait this long to buy a house then short sales might be a good option. Otherwise, you're better off buying from a private seller or through government sponsored programs such as Fannie Mae Homepath or Freddie Mac HomeSteps.
Although these programs don't offer short sale homes they do sell houses that have been repossessed through foreclosure or returned using deed in lieu. Both programs offer incentives to buyers such as reduced down payment requirements and low-cost renovation loans to improve property conditions.
There are a few banks that expedite the short sale process and quickly close on home sales. Working with experienced realtors is the best approach for finding out which banks are easy to work with and which ones are slow to respond.
If you're still interested in buying a short sale home we encourage you to visit our real estate blog to learn more about the process. Here we discuss the advantages and drawbacks of investing in distressed realty and provide additional details about home buying programs that can make the process easier.
Published on June 11, 2012 at 03:05 AM