We’re often asked, “Should I buy a short sale?” The short answer first: YES!
While you are pondering whether a short sale may be the way to go, they are being bought by less timid buyers who in some cases are saving significant money. Yes, short sales can be frustrating; however with the right advice you can minimize the pain and maximize your investment. We have seen many cases where the short sale buyer can get a 5 to 10% discount, sometimes without much competition from other buyers. Not all short sales are created equal. In fact, the average percentage of short sales that actually close is a disappointing 30%. However, with the right research and advice, you can increase your chance of success to more like 90+%.
What you need to know about writing an offer on a Short Sale…
1. Does the seller have a bonafide hardship? Many property owners think that just because they’re upside down that their lender will absorb their loss. Not the case. If the property owner has sufficient income to pay the mortgage, the lender, in most cases will not agree to the short sale. In certain cases, other hardships may qualify such as medical or job transfer.
2. How many loans are on the property? The best answer is one, however many close with two.
3. Who are the lenders? Some are easier to deal with than others and it’s constantly changing.
4. Who is the listing agent and how much short sale experience does he/she have? The listing agent is a key person in the whole transaction as he/she is the one who helps the owner during the short sale process. This persons skills will either make or break the sale. This is perhaps the most important factor for a successful short sale.
5. Is the owner in default or behind on payments? Not many lenders will even consider a short sale unless they believe that there is imminent danger of the house going to foreclosure. An owner with current payments is not likely to get the lenders attention.
These are just some of the questions we want to know up front before writing an offer on short sale.
There is nothing more frustrating for a buyer (or their agent) to be tied up in contract for 5+ months on their dream home only to have the short sale fail. While this isn’t always avoidable, most of the time it is by asking the right questions up front.
Let us know if you or someone you know would like good advice when it comes to a short sale.