People are talking about short sales and there’s a reason. A large percentage (over 30% ) of the properties listed for sale in almost every neighborhood in Snohomish County are short sale listings. Asking prices are often below regular sales and sometimes even below foreclosed properties.
The challenge is that some list prices are unrealistic. Many Buyers could be disappointed because the bank has the option of rejecting the price and this rejection does not happen until weeks or months into the transaction. Some buyers think these are realistic prices and are not aware of the risk that the price will be adjusted upwards. Secondly, the Bank may be collecting offers and may decide to work with another offer even though your offer has been accepted by the Seller. Another thing to be aware of is that the terms the lender offers the Seller may not be acceptable to the Seller and they may reject it causing the transaction to fail.
As attractive as a short sale property can be – you must be aware…
The price might change and the transaction could take a long time. This is not your typical real estate transaction. The Seller owes more on the property than they can sell it for so are trying the get the lender or lenders to take a loss instead of foreclosing. Since there are other parties involved, lender or lenders, homeowners associations and/or contractors) it takes time to get it approved and the sale price or terms may change. The time to get an approval and close varies in each transaction and can be as long as 4 to 9 months. You have to have the patience for it.
Make a reasonable offer, before the lender accepts the price you are offering they obtain an appraisal or Broker’s Price Opinion (BPO) and that is the value used by the lender as the property’s potential sale price. They do not care what the seller agreed to sell it to you for. The lender can reject the price and require more. Remember that every dollar the bank accepts under the original loan amount is a loss for them.
If there is a tenant living in the property make sure the seller has negotiated their departure from the property prior to closing. It is not a good idea to close while the tenant is in the property unless you want to become a landlord.
Be prepared to spend a few hundred dollars and lose them . You might be paying for inspections, an appraisal and even extensions of your locked rate. Sometimes a negotiator is involved that will require payment from the Buyer too. This fee is not usually paid unless there is a successful closing.
A Short Sale is a “business transaction” in which you pay with patience for the money you are saving. Many things can go wrong or get delayed in the process. Be prepared that even at the very last minute the transaction may fail. Please don’t get attached to the property.
I have successfully closed Short Sale transactions for both Sellers and Buyers, they are challenging and everyone should be prepared for these challenges. Please give me a call at 435-418-3183 if you have questions.