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Five Things You Need to Know When Buying A Short Sale by Mark Baker
In today's real estate market, you don't have to look very far to find a short sale. In my area of Palm Beach County, Florida it is not uncommon for one to find a development with 50% to 70% of the homes on the market listed as a short sale. The good news is that banks are getting better at handling the large volume of distressed property sales. However,[link widoczny dla zalogowanych], the bad news is that these transactions have many more pitfalls then a traditional home sale. In this article I will address the five things you need to know when buying a short sale that will help you throughout the buying process.
The first and one of the most important things to know about buying a distressed property is the experience of the agents involved. The listing agent is responsible for the pricing strategy, submitting the paperwork to the bank for approval and advising the homeowner throughout the process. Having a listing agent experienced with short sales will go a long way in improving the odds that the home owner will be approved for a short sale transaction and then close the deal. Having your agent,[link widoczny dla zalogowanych], also known as the buyer��s agent, familiar with the short sale process is also an important factor. An experienced buyers agent will know which questions to ask the listing agent to help guide you through the process and improve the likelihood of the deal reaching the closing table.
The second question you need to consider, what is your timeframe? If you were my client and you told me that you would like to be in a house in 30-45 days,[link widoczny dla zalogowanych], I would tell you maybe a short sale might not be for you. However, there are certain situations when the timeframe may be shorter for a short sale. If for example, there was a previous offer submitted on the property but by the time the bank approved the offer the buyer had found another property to buy. If your timeframe is flexible and staying in your current location for a few months is feasible then pursuing a distressed property could be a great deal for you.
Thirdly,[link widoczny dla zalogowanych], you need to know how many parties/lenders are involved in the distressed sale. It is not uncommon for there to be two different mortgages on a property, a first and a second. In addition there may also be a home equity line of credit to deal with or a mortgage insurance company. The fewest number of parties that need to approve the transaction the better. Your agent should ask the listing agent what parties are involved and then based on their answers you can make an informed decision on whether or not to move on to the next property.
Fourthly, the listed price of a property should be evaluated. If it sounds too good to be true, it just might be. In a normal market the pricing of a house is part art and part science, but in [link widoczny dla zalogowanych]ay's distressed market, pricing can be fraught with danger and bait and switch strategies. The typical approach for the listing agent to price a short sale is on a formula based on the amount owed on the property plus the commissions for the sale, attorney fees, penalties and taking into account the amount of time until foreclosure. But wait, you may realize at this point it would put the property well above market price, and you would be right. This is the listing agent��s way of proving to the bank that they attempted to get the best price for the property. Once the house has been on the market for a period of time without a full price offer, the agent will aggressively reduce the price of the property until they finally get a fair offer. The other approach used by listing agents is to price the property well below the current market value in order to get offers to start the short sale process, knowing full well the bank will not accept an offer at that price. If the buyer has not read this article they may not be aware of this tactic and not understand that there would be little chance of getting the property even though they have made a full price offer to the Seller. Your agent should know their market, the other comparable properties and the amount of money owed on the home to help you determine if the property is a legitimate deal or not.
Final thing you need to know is how your offer will be handled once submitted. If the property is at fair market price and your offer to the Seller is accepted, two things can happen. The listing agent will submit your offer with the short sale package to the bank for acceptance, and change the status of the property to a contingency status which will alert other buyer��s agents that there is an offer on the property. Or the listing agent may submit your accepted offer with the short sale package to the bank for acceptance but keep the property on the market leaving the door open for another buyer to offer a higher amount. The bank approval of the original buyer��s offer can take 2 months or longer to be finalized; in the meantime if the bank receives a higher offer for the property yours may be denied or countered.
Distressed properties are a reality of the current market. In the best scenario it's a win-win-win, for the seller they avoid having a foreclosure on their credit record, the buyer who gets a good price on the house and the bank who saves the cost of going through a lengthy and expensive foreclosure process. Armed with the knowledge in this article, you can now make a more informed decision when considering the purchase of a home that is a short sale. Happy house hunting. Visit me at http: //www. Palm-Beach-Real-Estate. net
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