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A short sale is the sale of real estate in which the proceeds from the sale are less than the balance of debts secured by liens against the property and the home owner cannot afford to pay the liens in full.
Short sales can be very tricky, no doubt about that. They also can be very frustrating in particular to the buyer who is involved in the transaction. There are certain things that can be done to help successfully complete a short sale. When purchasing a short sale there are some things that need to be considered before entering into a contract to purchase one. Here are seven things to consider when purchasing a short sale!
Purchasing a short sale is much different than purchasing a home that is a “normal” sale. A short sale is very complicated in comparison to a “normal” sale. When purchasing a short sale, the real estate agent representing the buyer should have experience in dealing with short sales. It is extremely important and the success of a short sale being successfully completed can often be determined by who the buyer’s agent is and their experience in dealing with them. A real estate agent with experience in dealing with a short sale will know the process of a short sale and also the correct questions to ask the lender and/or listing agent.
Multiple Decision Makers
In a “normal” real estate transaction there is one decision maker, the seller’s. When purchasing a short sale, it must be taken into consideration there is going to be multiple decision makers. It can range anywhere from two decision makers to five or six, depending on the number of lien holders. For instance, if a home owner has their initial mortgage and then decided a couple of years after buying the home that they wanted to do some improvements and took a loan against their equity, now there is three decision makers. In the case of multiple lien holders, purchasing a short sale can get even more complicated. Any offer to purchase must be reviewed and accepted by not only the seller’s of the home but also any party(ies) who have interest or ownership of the property.
Foreclosures are Still Possible
A short sale can take from a couple of months up to even 6 or more months. Often a lender who is reviewing an offer, when they finally get around to it, will counter or request more information from the purchaser. In the meantime, while these months are passing by, a foreclosure can be in the works at the same time. It must be known when purchasing a short sale that a foreclosure is possible at any time.
Many short sales are sold in “as-is” condition, just like a bank owned home or foreclosure. A common reason that a short sale is sold “as-is” is due to the fact that a seller may not have any money to complete repairs requested of them from a buyer or an appraiser. Every buyer has the right to a home inspection, but when purchasing a short sale that is being sold “as-is,” keep in mind that any repairs or safety issues may not be addressed by the seller. Another common reason that short sales are often sold “as-is” is because a lender will not want a seller spending money to complete the repairs.
Patience is a Must
As mentioned above, short sales can take from a couple of months up to as much as 6 months or more, so patience is an absolute must! When purchasing a short sale, it’s very possible that months could by and no progress is made. In addition to the lack of progress, it’s common that the response from the lender is little to none. Not knowing if any progress is being made and the lack of communication can be extremely frustrating to a buyer. While a lender is reviewing an offer to purchase, a buyer has basically taken themselves out of the open market. They are at the mercy of the lender and their response time. Lots of patience is a must when purchasing a short sale, period!
Denial is a Strong Possibility
After being patient for months, denial is still a strong possibility. After waiting months and months, an offer can be denied and can be heartbreaking. Every person handles denial differently, so when purchasing a short sale, it must be taken into consideration that denial is still a strong possibility.
Once the short sale lender gives the “clear to close” it is extremely important to be prepared! When purchasing a short sale a buyer must absolutely be pre-approved (not prequalified, there is a difference!) and be ready to close with all the necessary funds when the lender finally gives their approval! Once a lender gives their “clear to close” there is often a short period of time they allow for the closing to take place, so be prepared!
A short sale can be tricky and time-consuming, no doubt about it. When considering the purchase of a short sale, a buyer must take into consideration the above seven items. If unable to be patient, don’t get involved in a short sale! If unable to handle denial, don’t get involved in a short sale!
What other things do you think a buyer should consider when purchasing a short sale?
Other Resources Regarding Purchasing a Short Sale
Considering the purchase of a short sale in the Greater Rochester, NY area? Contact us, we’d love to help assist you with the process!
About the authors: The above article “Seven Things to Consider When Purchasing a Short Sale” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
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