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Buying a home can be one of the most stressful times in your life. A purchase of a home that is in pre-foreclosure or short sale is unlike a traditional home purchase. You should read carefully the points below and raise any points of concern with your Realtor.
Buying a home can be one of the most stressful times in your life. A purchase of a home that is in pre-foreclosure or short sale is unlike a traditional home purchase. You should read carefully the points below and raise any points of concern with your Realtor.
The Bank/Lender
- In a pre-foreclosure of short sale the Bank or lender is agreeing to sell the home for less than the amount of mortgage debt.
- They need to raise as much money as possible, and will need to justify to their organization, why the property will not get full price.
- A short sale is less expensive for a bank/lender than allowing a property to go through foreclosure, which will cost up to $50,000 in legal fees.
- All offers and decisions involved in the sale require the lenders approval.
- Various departments within the bank/lender organization need to approve each stage in the contract process.
- Contracts require a MUCH longer acceptance period and usually a longer closing period.
- The lender will consider 70-80% of market value a reasonable offer, depending on which bank or lender you are dealing with.
- Will consider more than one offer submitted.
The Seller
- Is often the only person the bank will communicate with, unless they give full approval for the bank/lender to communicate with the selling and buying agent.
- The seller can take a very active role in communications with the lender.
Your Agent
- May include a provision in the contract to seek seller’s approval for Buyers agent to communicate with Loan mitigation officer.
- Will keep you informed of progress.
- Cannot insist in any part of the process being eliminated, or changed to make the decision arrive quicker.
- Will provide you with market value of comparables properties (both sold and for sale) in the area to assist you in making your offer.
- Will make a note of everything negative about the property, take photos (wood rotting, dirty toilets, broken glass, gutters,) submit them electronically with the contract. Build your case as to why market value needs adjusting.
The Buyer (you?)
- May be able to purchase a property at 20-30% lower than current market value.
- Will need to support the process and understand that short sales typically take between 2 and 6 months to close.
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This is a good summary of this new type of real estate transaction. However, the banks are swamped with the number of properties that are ready for foreclosure. Just getting a bid in on a property has to go through several layers of bank clerks who are overworked. So, if you are going to make an offer on a short sale, put a time limit on the offer. Otherwise, you may be stuck waiting on an answer and therefore unable to bid on other properties.
short sales are anything but short
By: pvanson (Registered) on 07.22.2008 09:08