5 Tips In Buying A Short Sale
If you are buying a short sale, there are 5 important things that you must know!
#1 – No Guarantee In Buying The Short Sale.
There is absolutely no guarantee that the short sale will be completed and that you will be able to purchase the property.
Unlike a traditional sale, the seller’s lender does not have to allow the short sale. In some cases the property will end up in foreclosure. Or in other cases, the seller has a short term financial issue, gets whole on their mortgage and cancels the short sale altogether.
Yes a seller can still withdraw from the short sale in most cases.
#2 – Understand The Short Sale Status.
It is important to understand the status of the listed short sale property. You will want to question the listing agent in detail. The short sale is a process and there is a lot of paperwork, follow up and file maintenance.
You will want to find out where they are at with the short sale process? Have they made contact with the bank / short sale negotiator and have a completed short sale package? Are there are any foreclosure proceedings? If so, is there is a final judgement on the horizon?
#3 – Short Sale Timeframe.
The short sale could take 4-6 months. Sometimes shorter. Sometimes longer. So, as a real estate buyer of a short sale, be sure you in it for the long term.
Also, be aware of your opportunity costs. For example, if you lock yourself into a short sale, are there other deals that may be passing you by while you wait?
Many times the value of the short sale is discounted slightly. But does this property make sense to wait for?
#4 – Short Sale Escrow Deposit.
Most listing agents and short sale sellers will want escrow is in place to ensure you are a serious buyer and will wait for the long term.
I would be cautious as to the amount going into escrow. Consider a smaller amount in escrow at the time of contract execution and a second deposit once the seller gets short sale approval.
#5 – Short Sale Price. And finally price…
You may have waited all this time to find out that the bank will not accept anything less than $400,000. Which is much more than your short sale contract price and where you are comfortable paying for.
Now don’t get me wrong… The banks will have a BPO (Broker’s Price Opinion) completed to get an idea on value. And many times they are lenient with value usually within 8-10%. I have dealt with some short sale negotiators who just would not accept certain prices. They usually they come to their senses once they lose 1 or 2 buyers…
Just understand, because the short sale seller agreed to the price, it is subject to the lenders approval.
If you are a real estate agent, be sure to check out my video below on How To List Short Sales.
Also, check out the Short Sale Mastery Course!