It’s possible to get a great price on a house if you buy it during a short sale. Because the sellers are intent on avoiding foreclosure, interested purchasers have the opportunity to pounce and get a property for a price that is lower than the current market value. It may even seem like the smoothest transaction that has ever taken place: the seller is serious about selling a property, and you are in a position to purchase the home. I take it that this is as good as gold. Certainly not in every case.
Short sale transactions are not the same as regular house sales, despite the fact that they could seem to be straightforward. A short sale comes with the potential for a lot of complications and additional expenses to occur. When a house is sold at a price that is lower than the amount still owed on the mortgage, this kind of transaction is known as a “short sale.”
Short Sale
In contrast to regular real estate transactions and foreclosures, short sales operate differently. When making an offer on a traditionally sold house, you deal only with the seller and the seller’s real estate agent. Because the lender has already purchased the home in foreclosure, you will make an offer straight to the lender. There will not be a buyer engaged in this transaction.
When a house is sold via a process known as a “short sale,” it is done so at a loss. Therefore, the lender has to provide their blessing before any bids can be considered acceptable. The seller still owns the property. The following are some pointers on what to anticipate and how to make your offer stand out from the rest of the competition.
Get Your Financial House in Order
It is true that having solid finance helps an offer look stronger in any circumstance, but this is particularly true in the case of a short sale.
You can increase your chances of having an offer accepted by either being a cash buyer or having a pre-approval letter from a lender, as stated by Mark Ainley of GC Realty Investments in Chicago. “You can increase your chances of having an offer accepted by either being a cash buyer or having a pre-approval letter.” The pre-approval letter will carry more weight than the pre-qualification letter since it demonstrates that a lender has previously evaluated your finances and authorized you for that loan amount.
In addition to being pre-approved for the loan, being ready to put down a significant amount of earnest money as a deposit will assist bring your offer to the top of the stack.
Prepare to Hold Off Until You Get the Authorization
When it comes to short sales, the clearance procedure is a little bit different. Before the transaction can go through, your offer will first need to be accepted by the seller, as is customary, and then it will be sent to the lender for evaluation.
Before a decision can be made on your offer, it will first be evaluated by a number of parties, one of whom will be the lender. The lender has to determine how big of a loss it is prepared to take on the loan, and it will most likely investigate your financial situation to determine whether or not you have the resources to purchase the property. This procedure might take a few weeks, but in most situations, it will take between three and four months to complete.
Don’t Prepare for Unforeseen Circumstances
Before you commit to purchasing a house, it is common practice to engage in negotiations with the seller to secure certain contingencies, such as a reduction in closing costs, coverage of fees, or completion of necessary repairs. However, in the case of a short sale, it is necessary to take into account the lender as well, and the likelihood of the lender approving your conditions is lower.
Keep in mind that the lender is already going to be suffering a loss on the loan, and they won’t want their profits to go down anymore if they can help it.
According to Karen Hanover, a former short sale negotiator with a large lender, “the one making the ultimate decision on whether or not to accept your offer is the lender.” Not only will they consider the asking price, but also the amount of money left over after deducting all of the associated selling expenses. They also want the homes to be sold in their current condition.
Don’t Go it Alone While Negotiating a Short Sale
Both the bank, which will be looking to recuperate as much of its initial investment as possible and the seller, who will be intent on getting rid of the property before it goes into foreclosure, will be motivated to maximize their profits. Who, then, has your best interests in mind? It is essential to have someone on your side who can speak for you and make certain that you leave the negotiation table feeling content with the outcome.
Before you even think about making an offer, you should be sure to bring on a real estate agent — or perhaps legal counsel — who specializes in transactions of this kind. Only then should you ever contemplate making an offer.
