Look Before You Leap
Maybe It Is and Maybe It Isn't
You've been checking real estate listings and have found a few pieces of property that interest you - but one in particular has tickled your fancy. You know it's priced way below value and you're chomping at the bit to get an offer in before someone else snaps it up. Hold on there, cowboy. Before you go galloping off wildly into the sunset, have your agent make a few calls to gather some information. Short sales can be tempting, but just because the house is listed as a short sale doesn't mean you can actually buy it - the lender needs to approve and he may be having an off day. It also doesn't mean that the price listed is what is really needed. Sounds like fun, doesn't it?
Be Informed
There are a few things you'll need to know before you make the effort to buy that short sale property. Less than one in ten short sales close in some markets, the reasons are many and varied, but mostly it's the lender that stymies the sale. Short sales take between two and four months to close, on average, and even though they are priced below comparable sales, they end up being priced in line with sales that are pending - the length of time it takes to close a short sale is the reason for the pricing. Some short sales are priced so low that the mortgage holder will never allow a sale. Of course, these listings get more offers than most. The best way to get into the running in this kind of situation is to be sure your offer is priced close to the market value of the property. If you aren't able or willing to pay more than the paltry sum suggested, then opt out of the race on that property.
Hire An Agent With Savvy
If you have hired an agent who is savvy in the short sale market, then you can have him or her find out how much is owed against the property and how many loans are outstanding. Bear in mind that if there are several loans outstanding on the house, then the lenders with the highest stakes will get the bulk of the money while the second or third mortgage lender will get very little. On top of that, some lenders are a real piece of work to get along with, and your agent (if experienced in short sales) will be able to steer you around the rocks when the time comes to deal with them. An offer that is only 20% or 30% of the mortgage amount will likely be "round filed."
Make sure your agent knows his or her way around short sales. A listing agent who is advertising a home that is a short sale but has never actually closed one is a risky choice. It's up to the agent to deal with the lender and submit the short sale package. It's the listing agent's job to negotiate with the lender since the buyer's agent can't talk with the mortgage lender. Sometimes an agent will hire an outside company to do the submission and negotiations with results that are less than stellar. An agent with no experience can mean rejection of your short sale purchase.
Being aware of the potholes in the road can be of great value in keeping you on track to purchasing your short sale house.
