Buying a Short Sale
Buying a short sale
Definition of a Short Sale:
A short sale occurs when a house sells for less than the loan balance. The bank agrees to accept less money than what is owed due to an economic or financial hardship on behalf of the seller.
The Process:
A short sale invloves a lot of paperwork, time and effort. The bank requires the seller to provide evidence of a hardship. Generally the lender will require a buyer to make an offer before they will consider the short sale request. The process can take up to 4 to 6 weeks for a response. once the short sale is approved, the closing generally takes place within 30 days.
5 things you need to know BEFORE buying a short sale:
- Comparables Sales – Short sale listings should be priced at or below closed comparable sales. Some listings are priced so low just to receive an offer. Some lenders will reject the offer while most lenders will counter the low offer. If you are not willing to negotiate or pay near market value then you should pass .
- Mortgage Lenders – Ask your agent to find out how many loans are on title. If there are more than one, the response time can be longer. Some lenders, get a reputation for being difficult to work with. If your agent is an experienced short sale agent, he or she will know who these lenders are and can advise you of the difficulty you may encounter.
- Number of Offers Received – Homes priced under market value will receive multiple offers. The listing agent is not required to disclosue the terms of those offers but you do want to know how many offers you are up againist. You want to make an offer that will beat the competition yet still be below or at market value.
- How long do short sales take? – Every short sale is different and as much depends on the lender as it does on the listing agent. Some listing agents outsource their short sale negotiations to a third party, which can often delay a response. Here is an estimated timeline once an offer is received. Day 1: Offer received and short sale package submitted to lender. Day 15-30: Short Sale assigned to a negotiator. Day 30 – 60: Bank obtains and analyzes home evaluation. Day 60 -90: Bank reviews & approvals/counters/rejects offer. Day 90 – 120: Short sale approved and closing begings.
- Representation – Hire an agent with short sale experience. An agent with experience in short sales will help to expedite your transaction and protect your interests. You don’t want to miss any important detail due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner.
