If you are actively looking to buy a house, you’ve no doubt heard of short sales. A short sale is the name given to a transaction where the owner of the home will not be able to sell the house for enough money to pay off their mortgage. The bank must agree to accept less money than the home owner owes in order for the transaction to close.
Buyers are making offers on short sales for good reason. Short sale listings are usually as competitively priced as bank owned foreclosure property and they make up a huge portion of the Central Florida listing inventory. As of this post, there are over 17,000 active short sale properties listed in the Mid-Florida MLS.Sounds good, right? For many buyers the experience has been anything but good. These buyers have found themselves smack dab in the pit of short sale hell. There is plenty of wailing and gnashing of teeth but very few closings. Buyers have been known to be locked into this nightmare for months on end with no expectation as to if or when they might be freed. At times it would seem to the buyer that the only one that knows they are still is the process of a transaction is the buyer, themselves. As there is little news or hope offered from the real estate agent or seller.
How can you avoid falling into short sale hell? What precautions should you take before entering into a binding contract on a home being sold subject to a short sale? While there are no guarantees, the following precautions could help you close on your short sale transaction.
1. Ask to see a current market analysis of the home before making an offer. If the home is priced at a level that seems too good to be true, it probably is. The lender will require an estimate of value be provided them before they make a decision on the short sale. Offering prices falling well below market value will rarely be accepted by the lender and will result in wasted time for you and the seller. A current market analysis will give you confidence that while you are buying the home at a fair price, it is also a competitive price for the area.
2. Ask your agent how many short sale transactions they have closed. If the agent has never closed a short sale transaction you will want to be careful signing up as their guinea pig. It is ok to ask them to enlist the help of an experienced agent or their broker to guide them through your transaction. And while we are on the subject of agents, if your agent is not full time, move away quickly. Short sale transactions are too complex and require full time attention if they are going to be successful.
3. Find out if the seller mortgaged the farm. Is there more than one mortgage on the home? This could slow down the process. Are there more than two mortgages on the home? You are facing a tough road.
Buying a short sale does not have to result in futility. There are a number of precautions including the 3 discussed here that can help you end up at the closing table and not sitting in the single, straight-chair that seems to be the norm at the short table sale (from hell). Over 13,000 homes that were sold this year subject to a short sale have closed. You can just as easily be part of that group. As a Certified Distressed Property Expert, I can confidently guide you through the short sale maze. Give me a call, today.
Photo credit by Pefect Pose
Photo credit by Pefect Pose
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