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                             What can I expect when purchasing A Short Sale?


What exactly is a short sale? The term short simply means that the property today is worth less than what the total amount is owed on it. The seller may have one, two, or in even rare cases three mortgages. When these totals are higher than the current appraised value it is a short sale. Sometimes these properties have other liens on them….like IRS liens, a mechanics lien, child support, and even credit card debts.

Why Should I purchase a short sale? If you don’t need to close in the next 60 days the best reason to purchase a short sale is that you can typically get a pretty good deal on one and who doesn’t like that these days. It is very common to buy a short sale that is 10 -20% below fair market value and some times even more than that. These are distressed properties so although purchasing at FMV does happen in my opinion it is best to get the property as low as possible. On a side note you’ll be helping some one who is in need of some help and trying to avoid a foreclosure so that is a nice perk while getting a good deal on your next home.

So, you found a home you like and it’s a short sale. Now what? You now know what a short sale is so now let’s discuss the first step. You write an offer just like any other offer. In most states there will also be a short sale addendum that basically just discloses that it is a short sale and what to expect the process to look like. If you’re offer is reasonable there is a good chance the seller will accept it. You don’t usually see a lot of counter offers with these purchases since the seller is not making any money and they are just trying to avoid a foreclosure.

Offer was accepted! Now we’re in the hurry up and wait stage. The offer now has to go to the lien holder(s) for their approval. As you know the property is worth less than what the seller owes so the lien holder(s) have to decide if they are willing to take less. This process can take 60-180+ days. If it is a pretty basic short sale and the parties you are working with are short sale experts like we are then there is no reason for this process to take more than 90-120 days. We see many of them get approved in 60 days or less.

What is the bank really looking for? Here is where many agents who are not short sale experts get tripped up. It is all about the numbers. The banks do not do short sales because they are nice. They do them because they make financial sense. If they will make .01 or more than foreclosing on a property they will approve the short sale. The seller just has to show early on that they have a valid hardship and that they cannot financially solve their own problem. Most short sale sellers are behind 3- 6 months on their mortgage and have had a severe loss of income so the above is usually easy to show.

The bank wants more money. Of course they do. They are losing over 100,000 on most of these transactions and they always want more. The job of the negotiator is to limit their loss severity. This is where working with an agent who has a lot of experience with these types of transactions earns their money and save you some to. Just because they say they need 10,000 more doesn’t mean it is so. That can still be negotiated! Remember this is a negotiation and their job is to get more money out of everyone. Since we work with the banks everyday we know their tricks and we know their bottom line so don’t let them fool you.

Dirty little secret(s) Two things most people don’t know. These negotiators want these to close as bad as we all do. They have goals on how many to get closed every month and they get a bonus on how much money they save on each file…is it no wonder why they always ask for more? I know of dozens of circumstances where the bank actually approved the short sale, but the servicer handling the loan for them actually countered back to get more money. Be on the look out for this and other tricks…

Offer is approved. Congratulations!! Make sure before you got to this point that your lender is ready to go. These banks put expiration letters on their approval letters and it isn’t easy getting extensions so you will want to close at least 48 hours earlier than the letter says just to avoid any last minute delays.

In summary. Short sales can be a great way to save some money on the perfect house for you. They will take time, but with the right people in your corner they will close and it will be worth it in the end. Make sure you have an agent that works on short sales every day. Some agents claim they are short sale experts. Ask them how many they have successfully closed. If they haven’t closed at least 25 they are not an expert. Our team has closed over 100 short sales and instead of sitting in a class getting certified to do short sales we’re just out doing them.

Call us. Feel free to contact us anytime with any short sale or real estate questions. We’re here to help. Call us today at 813-739-5948 you’ll be glad you did.