My blog readers and clients know that I generally advise against buying short sales. Short sales are often problematic for a number of reasons, the price is often deceptive and interested buyers may wait two to six months for the seller's lender to make a decision about their offer with no guarantee that it will not just go ahead and foreclose or accept another offer.
However, banks are approving more and more short sales and there are some instances where a buyer might want to consider a short sale. Some sellers have situations where they will have fewer problems getting short sales approved and sometimes, a short sale home will be the best option for a buyer. Below is a list that may help you decide whether you should pursue a short sale. If all or most of the criteria below exist, you might want to try your luck...
1. You don't have to move or be in contract by any particular date. This is absolutely essential since, no matter what the listing agent says, lenders often take months to make their decision and there is no guarantee that the lender will even allow the sale to happen.
2. There is limited inventory or intense competition in the area or type of property that you are looking for. Short sales are less desirable so there will be less competition. Also, short sales stay on the market longer so they disappear from the radar of many buyers. Because you are still working with a human seller (as opposed to an institution) and at this stage the bank is more worried about getting as much money as possible than making sure the sale sticks, buyers who can make strong offers but who are using FHA or who are unable to compete with investors or buyers with stronger financial credentials may have better luck with short sales. On the other hand, if there are tons of REOs on the market where you are looking, you should always favor the REOs.
3. There is one loan, one lender or the sale/price has been approved by the seller's lender. In these situations, the seller's lender will probably take less time to decide whether to accept your offer because, either, they are a few steps closer to making a decision or there are fewer of the hurdles (i.e. a second lender that stands to lose out completely) that tend to trip up lenders.
4. The listing agent is experienced with short sales, has a reputation of being hardworking or responsive or has hired a company that will negotiate the short sale with the seller's lender on behalf of the seller. Short sales require daily contact with the seller's lender. Banks are often dealing with so many short sales that their staff often ignore the ones that they aren't being bugged about. Someone on the seller's side, the agent or someone hired by the agent or seller, should be on top of getting the bank everything that they need to make a decision and then pestering the crap out of their contact at the bank to encourage the bank to respond quickly.
There are some advantages to buying a short sale property. Once the seller's lender accepts the buyer's offer, the transaction proceeds as a normal deal between a buyer and a seller. It's a lot less harsh than buying an REO where the lender will try to shorten contingency periods and will threaten to levy financial penalties if the buyer requests extra time to close. Also, because there is less competition, buyers will have more time to view the home and decide whether to make an offer and they may even be able to get a better deal on a short sale.
I
wrote this article to let buyers know that all short sales aren't evil
and aren't created equal. It's important that buyers learn about this
market and the situation of sale and how it will work their their
situation before they proceed.
Comments