How to Buy a Short Sale Property
The very first step in purchasing a short sale property in the Goodlettsville, Hendersonville, White House, Springfield and other areas of northern middle Tennessee, is to find a qualified Realtor® who has the experience and the qualifications in the short sale industry. This savvy Realtor® will also make sure that the seller's agent has those same qualifications. If not, it is very likely that you will run into delays as the sale progresses.
Short Sale Properties are usually sold just below fair market value and many times are in very good condition.
These properties are usually “still lived in” and the homeowner is trying to avoid foreclosure by exercising the option of selling their home using a mortgage loan short sale.
The homeowner still has ownership of the home and it is not a bank owned property.
The mortgage lender may agree to a sale of the home and short the loan balance by accepting less than what is owed as long as it does not dip below the pre-established limit.
I thought I could get a great deal… You can get a deal, just not a steal.
Short Sale properties are usually sold below fair market value.
There are parameters however, and it will depend on the type of loan the seller has, such as FHA, VA or Conventional.
Lenders can usually not accept anything less than 85-88% of fair market value, plus their expenses. The amount owed by the seller on their mortgage is not a factor. The fair market value is the determining factor.
Will the Lender Consider My Offer?
In order to have a successful contract, and one that will be accepted fairly quickly, the offer must be within the guidelines stated above.
The homeowners and their agent will contact your agent with a counter offer if they feel that your offer is below the threshold that would normally be accepted.
The home still belongs to the homeowner, not the lender, so they will do all the negotiating, just as they would in a normal sale, as there are thresholds to follow.
This is not a foreclosure where the bank owns the property.
I Have Heard That it Can Take Months to Get an Answer
Again, this will depend on what type of loan the homeowner has. If they have an FHA loan, then they actually have to be approved by HUD(Housing and Urban Development) to enter the pre-foreclosure program. This approval process should have taken place before the property was placed into the MLS (Multiple Listing System), which should work in your favor.
If it is VA or Conventional, and all of the homeowner documents were properly submitted and reviewed, then there should be very little delay.
Most delays come from inexperienced agents and unknowing homeowners who submit incomplete or incorrect documents at the beginning of the pre-foreclosure process. It is wise to have a Realtor® who has been specifically trained in this field.
Can I Get Any Repairs Done?
The only way to have repairs done is if the property is uninsurable and the buyer can’t get a loan. I.E. there is a structural problem or a very badly leaking roof. In this case, the seller’s lender may agree to have you “gross up” the sales price to include the price of repairs, but it will have to be on the closing statement and be paid directly to the contractor.
Will My Closing Costs Be Paid?
This will again, depend on what type of loan the homeowner has and what type of loan the buyer is bringing. If the homeowner has an FHA loan and the buyer is bringing an FHA loan, then the maximum allowable buyers closing costs can not exceed 1% of the contract price. If the buyer has a non-FHA loan, then no closing costs will be allowed.
If the homeowner has a VA or Conventional loan and regardless of the type of loan the buyer has, the maximum amount that will be considered is 3% of the contract price and the contract must not be lower than fair market value.
I Need More Closing Cost Assistance!
The truth is, lenders have certain parameters that they must follow and can not deviate in a mortgage loan short sale. If you are not able to abide by the above closing cost assistance, you may need to re-consider your desire to purchase a short sale. You should discuss this with your Realtor ® prior to making an offer on a Short Sale Property.
What is an Acceptable Offer?
The best offers are those that don’t ask for anything additional. a slam-dunk ,if you will..…
Ok, I am ready to search short sale real estate listings!
The information on this site should not be construed as legal advice. The content herein is considered to be general advice and you should consult with a qualified Realtor®, attorney and tax advisor before acting.
