Have you heard lots of rumors regarding short sale homes and you are looking for answers? You are in luck! Homes for Heroes is here to give you some helpful tips for a good outcome. A short sale can be a great investment if you know what to avoid.
That being said, it will require patience, because you will need to wait longer than usual. A short sale does not fall within the typical timelines of regular home purchases. Regardless of your scenario, Home for Heroes is here to assist you with all your home buying needs. We have certified affiliate real estate agents that are devoted to serving you as well as you serve your community. Be sure to sign up here to get that conversation started!
Before discussing the nitty-gritty of short sales 101, what is a short sale anyway?
A short sale is when a lender will accept payment for less than the owed amount for the house, thus allowing the homeowner off the hook. Typically, the listed home is below market value. There are lots of reasons that cause a short sale:
- Insufficient income due to, and not limited to, job loss or medical crisis
- Estate sale typically triggered by death or debilitating illness.
- Fall out from homeowners/investors- Dispute
How Does a Short Sale Work?
The lender may not be on board, even though the home is on the market. For a short sale purchase to be successful, you need the lender to agree to sell the home to you for less. Go into the offer without your heart set on the house.
It can take some time to get a response from the bank, so you will have to be extremely patient. With that in mind, be sure you include a reasonable expiration date on your offer. Don’t get stuck in the limbo of the unknown.
How do you know what to offer for a short sale?
A broker price opinion (BPO) can be a great tool to know where to start with your offer. Be sure you are using your agent’s advice, not just the seller’s BPO. The seller’s BPO may be inflated to increase your opening offer. Plus, there is some math involved, and not everyone is good with numbers. That gives you another reason to use our trusted Affiliate Real Estate Agents.
Do your diligence in checking the public record on the home. Armed with the right information, you should be able to make the best decision and offer. You need to know if there is a second mortgage because it can determine your progress.
You can buy the home below market value. A short sale can be an excellent way to save on your home purchase. You will get a bigger bang for your buck and get more real estate for your dollar.
You might be able to buy it below the listed price. There is a little wiggle room for the selling price of the home. The value indeed depends on the appraisal for the home. If the appraisal comes in lower than the listing price, you can offer to match the assessment. It’s not uncommon for the lender to accept the offer.
The home comes as is, no repairs, no home protection, and no roof/pest/termite inspections. As a buyer, this will be a risk you will take to purchase a short sale. You cannot counter offer to have repairs addressed before you close on the home. It is still a good idea to have an inspection. At least you will know how and what you need to budget to get the house livable. Remember that just because the home is a short sale doesn’t mean it has been neglected. As you can see from the prior listed reasons for short sales, some causes for a short sale are misfortune and a falling out.
A short sale takes longer to close. Most short sales take much longer than 30 days to settle. You are no longer just dealing with the homeowner. You are now at the whims of a bureaucratic bank that’s not eager to lose money. A short sale isn’t their first choice for a solution. They will want to be sure all other options have been exhausted before they give their stamp of approval.
Things to Remember
If you are interested in a short sale home, there are some things you need to remember.
- Agent: Only use an agent with short sale experience. If you have your heart set on using cousin Jimmy who just received his real estate license, that would not be wise. Not any agent will do. You want to make sure your agent has the required short sale certification for your state. The agent should also have several short sales under their belt. There are a lot of variables in short sales, and you need an experienced agent.
- Commissions: The lender approves the commission, not the seller. The lender is already losing money, so they lean towards only paying the listing agent and not the buyer’s agent. Therefore, the listing agent will need to split their commission with the buying agent. Crazy right? More work, less pay.
- Other Offers: It is possible that other offers might come in on a home. You do want your offer to be competitive, so don’t low ball your offer. If your initial offer is above the appraisal, you aren’t “up a creek without a paddle.” You can offer the bank the appraisal price. Most banks are happy to adjust the listing to get it off their books.
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