Short sales allow borrowers struggling to make their payments to put their homes on the market for less than they owe on the properties. When offers come in from buyers, the bank or mortgage company has to approve the deal. Lenders will only do that when a short sale costs less than foreclosing. What’s more, every bank or finance company with a lien on the property, including those who provided a home equity loan, must accept the terms or be paid off. That extra step, and the financial industry bureaucracy it involves, is why most buyers find short sales to be a long, aggravating effort. Here are four smart moves for navigating the process.
This type of home purchase is all about presenting the lender with a deal it can’t refuse. Banks and mortgage-servicing companies are most likely to approve buyers who: have a substantial downpayment, have been pre-approved for a loan, and place no contingencies on their contract, such as having to sell their current home before proceeding with the purchase.
Many banks have companies that manage their short sales. You need a pro of your own to match that experience and help you navigate the process. You should hire a realtor. A real estate agent who has done lots of short-sale transactions will know how much of a discount is common in your area, what you’ll need to do to get your bid accepted and when to walk away from a deal that’s not going your way. Any home that has spent several months on the market can indicate an unmotivated seller or an inexperienced listing agent.
Your agent should ask the seller’s agent if the bank has actually agreed to sell the home for less than is owed or if the seller is just hoping to do so. In the latter case, you could be wasting your time. Knowing how much to offer is key, but it’s not as straightforward as figuring your bid on an owner-occupied home or even a foreclosure.
Be aware that the listed price is only an estimate of what the seller and listing agent think the bank will accept. Oftentimes, listing agents market homes at a bargain price, only to have the final bank approval come in at a higher price.
Properties that have been listed for more than 30 days present an opportunity to negotiate with the seller. How much of a discount can you get? Location and condition make a big difference. Well-maintained properties in popular neighborhoods will have less of a discount than properties in poor shape in unpopular neighborhoods. For further reading, check out this useful article about Tips for Winning a Short Sale.