Short sales are all over the news these days, just behind the reports on the record number of foreclosures. And, a lot of homeowners are either severely under water on their mortgages - owing more than the home will sell for and do not have the funds to make up the difference – or are in economic woes themselves due to job loss or any number of other of life’s difficulties.
Yet, they do not want to just walk away, or turn in the keys. Simple honor prevents these homeowners from just walking away; so they turn to the relatively new phenomenon of the short sale. That is, the lender agrees to take less for the home than the mortgage balance on that home, as payment in full.
And that creates a potentially terrific buying opportunity to get a great deal on a home, and help out a homeowner in need.
Having been the lender on quite a number of short sale purchases over the past couple of years, I can offer some advice for a buyer who is considering putting an offer on a home that is offered as a short sale. And the very first piece of advice I would give is to choose your Realtor well. Sure, that goes for all real estate transactions. But with a short sale, it is vitally important.
You may not realize, but most real estate agents do not like to work with short sales. I sat down with one who does, Joshua Jarvis. In fact, Joshua successfully navigates the short sale process for buyers more than nearly any other agent in north metro Atlanta. And he sure had a lot of advice.
So, between the two of us, here are the top strategies to do when buying a short sale property:
- Short sales take time and require patience: So make sure you choose an agent who is experienced in short sales and can therefore manage expectations along the long road.
- Most banks will pay a maximum of 3% toward the seller closing costs; HUD will only pay 1% however. Plan accordingly for cash to close.
- Most banks will only entertain a short sale on a property when the homeowner is 30 to 60 days behind on their mortgage.
- Given that, it generally takes a minimum of 90 days from offer to closing. Again, patience will help this transaction succeed.
- The due diligence time for inspections, etc, begins once the lender approves the short sale. No sense shelling out for inspectors until the lender gives the go-ahead.
- And, possibly most important – get your loan approved early. There is nothing worse for all parties than going through the grueling process of getting a short sale approved, only to find that the buyer does not qualify for the mortgage. Don’t get pre-approved. Get fully approved, early.
So, with the right lender and the right agent, venture out with confidence and put an offer on a short sale property. With patience, you really could get the deal…of a lifetime.
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