Wait! It may be too good to be true! When you spot a short sale house that interests you, before you get all excited over the prospect of buying that short sale house, pick up the phone and call me. I need to research that short sale listing first.
Not all short sales close. Just because that home is listed far below market value doesn’t mean it’s really for sale (because it’s subject to lender approval), nor does it mean it will sell at the advertised price. Here are some things you need to know before trying to buy that short sale.
Comparable Sales: Most short sale listings are priced below comparable sales, yet they are priced in line with pending sales. This is because short sales take from 2 to 4 months, on average, to close, and pending sales will become the comparable sales at closing.
Some short sales are priced incredibly low. They are priced so low that the seller’s bank will never accept a sale at the listing price. These types of listings receive multiple offers. To get your offer accepted, it will need to be priced near market value. If you’re not prepared to pay above the listed asking price on a lowball short-sale listing, then pass.
Loans and Lenders: I will research how much is owed against the home and find out the number of loans that are recorded. A second or third mortgage lender will receive very little as compared to the amount of a senior lender in first position.
Moreover, some lenders, deserving or not, get a reputation for being difficult to work with. As your short sale agent my experiences are helpful in advising you of some of the potential difficulties you may encounter.
If your offer is 20% or 30% of the mortgaged amount, it highly unlikely that your offer will see the light of day on the negotiator’s desk.
Listing Agent’s Sales History: A listing agent who is advertising a short sale, but who has never closed a short sale is a risky proposition for you. That’s because it’s up to the listing agent to submit the short sale package to the lender and to negotiate. As your agent, the buyer’s agent, I will not be authorized to speak to the bank and I will rely upon the effectiveness of the listing agent. I will coach the listing agent as long as they are receptive to my input.
Short Sale Qualification: I will find out if the seller has completed their short sale package and if their package has been submitted to their lender. This step of the process is critical and is ideally performed before the home is put on the market. A home listed as a short sale that has not been qualified by the lender will delay your offer being approved, if at all. A completed seller’s short sale package consists of, at minimum, the following:
Some short sales are priced incredibly low. They are priced so low that the seller’s bank will never accept a sale at the listing price. These types of listings receive multiple offers. To get your offer accepted, it will need to be priced near market value. If you’re not prepared to pay above the listed asking price on a lowball short-sale listing, then pass.
Loans and Lenders: I will research how much is owed against the home and find out the number of loans that are recorded. A second or third mortgage lender will receive very little as compared to the amount of a senior lender in first position.
Moreover, some lenders, deserving or not, get a reputation for being difficult to work with. As your short sale agent my experiences are helpful in advising you of some of the potential difficulties you may encounter.
If your offer is 20% or 30% of the mortgaged amount, it highly unlikely that your offer will see the light of day on the negotiator’s desk.
Listing Agent’s Sales History: A listing agent who is advertising a short sale, but who has never closed a short sale is a risky proposition for you. That’s because it’s up to the listing agent to submit the short sale package to the lender and to negotiate. As your agent, the buyer’s agent, I will not be authorized to speak to the bank and I will rely upon the effectiveness of the listing agent. I will coach the listing agent as long as they are receptive to my input.
Short Sale Qualification: I will find out if the seller has completed their short sale package and if their package has been submitted to their lender. This step of the process is critical and is ideally performed before the home is put on the market. A home listed as a short sale that has not been qualified by the lender will delay your offer being approved, if at all. A completed seller’s short sale package consists of, at minimum, the following:
- Seller’s hardship letter
- Tax returns
- W-2s
- Payroll stubs
- Financial statement
- Bank statements
Some sellers do not want to cooperate with their lenders and may not have submitted their short sale package for approval. Others have never been told by their listing agent that these documents are mandatory. You do not want your short sale purchase delayed because the listing agent did not advise their client to work with their lender and to submit the lender’s mandatory documentation. When the seller fails to comply with the lender either by poor representation or by their being uncooperative with their lender, the approval of your offer may either be delayed by months or not reviewed/accepted at all.
Multiple Offers
Homes priced under market value will receive multiple offers. A listing agent is not required to disclose the terms of those offers, but you want to know how many offers you are up against.
Here’s how it normally works:
Multiple Offers
Homes priced under market value will receive multiple offers. A listing agent is not required to disclose the terms of those offers, but you want to know how many offers you are up against.
Here’s how it normally works:
- When a short sale home first comes on the market, the first offer will most likely be below list price.
- The second offer will be at or near list price.
- The third offer will be slightly higher.
- The fourth offer will be significantly more.
You want to make an offer that will beat the competition yet still be below market value, or don’t waste your time.
The Procedure: Although REALTORS are required by the REALTOR Code of Ethics to treat everybody fairly, not every agent is a REALTOR. This means some short sale listing agents may decide to submit only the first offer to the bank and withhold all other offers.
Withholding other offers could be considered to be a violation of the fiduciary relationship forms between the listing agent and the seller. The seller is entitled to receive the highest and best price. Realize that even if your offer is submitted to the bank, as time marches by while waiting for the short sale approval, another buyer could outbid you.
The Procedure: Although REALTORS are required by the REALTOR Code of Ethics to treat everybody fairly, not every agent is a REALTOR. This means some short sale listing agents may decide to submit only the first offer to the bank and withhold all other offers.
Withholding other offers could be considered to be a violation of the fiduciary relationship forms between the listing agent and the seller. The seller is entitled to receive the highest and best price. Realize that even if your offer is submitted to the bank, as time marches by while waiting for the short sale approval, another buyer could outbid you.
