Short Sales Test Homebuyers’ Patience
Those searching for the best housing bargains on the market might consider buying a short-sale property, but there’s an important qualification for buyers interested in going this route: They need plenty of patience.
In a short sale, a homeowner’s lender agrees to accept less than is owed on the mortgage for the property. It’s a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.
Lenders have become aware that short sales are the best way to reduce their losses when a modification is not an option. The short-sale option also is less damaging to a seller’s credit than a foreclosure.
A short sale can be attractive to a home buyer since the lender often will accept bids on the property that can be 10% or more below the market value, determined by the prices of comparable, nearby properties.
Although the mortgage balance is probably greater than the price a seller could expect in a traditional sale, the lender may be willing to take less than is owed in a short sale if this will help the lender avoid the further expenses of foreclosing and taking over the property. The savings, however, often come at the expense of a home buyer’s time.
Short sales should be called long sales. In some cases, it could take months for a buyer to hear back from a lender. Buyers sometimes wait 30-90 days after an offer is written just to find out if the offer is accepted or rejected.
Are the savings worth it to you? Consider the following:
1. You’ll wait in the dark. Perhaps just as frustrating as the wait time is the fact that you likely won’t be privy to details as the deal is progressing. That could mean going months without an update. Lack of information or an up-date is very frustrating for most buyers.There are reasons for the wait though: A lender could be considering multiple offers. If the seller had both a first and second mortgage, that could also make the process more complicated.
2. Banks will make you a deal, but within reason. There are deals to be found in short sales, but don’t expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently. The offer should be aggressive, but not ridiculous. The misconception is that banks should be happy to get the property off the books. They are, but only to a certain point.
3. Sales are “as is.” In a short sale, it isn’t likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale. Do a home inspection and know what you’re getting into, but remember that your bid is for the property “as is.” The seller will not give you a credit for repairs. The last thing they will do is make repairs.
4. When a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home. It may take months before the deal closes, even after the offer is accepted.
5.If you are is serious about pursuing a short sale, you must be aware of the process and the consequences as well. Remember.....PATIENCE! PATIENCE! PATIENCE!
By Janet Wrestler