As a real estate agent it is very frustrating in this business that one bad experience with an agent means that all agents must work the same way. WRONG! When dealing with short sales, different agents do things very differently. It’s plain and simple….there is a RIGHT way and WRONG way of handling short sales…period.
For buyers that have been involved with short sales “gone wrong” you’ll want to keep reading, especially if you have been searching for the home of your dreams and now you have found it, only to discover it’s a short sale and you’re not sure how to proceed.
Do You Qualify?
Here are 5 Questions to Ask the Listing Agent:
1. Ask How Many Short Sales They Have Done Before.Why is this so important? If the agent has never done a short sale before or has only done a few they may not be able to handle the transaction and ultimately get it done. If they have experience they will have the right contacts in the financial institutions to get the approval needed. Without the right contacts you could be waiting a very long time to hear from the lien holder.
2. The Agent Should Know How Many Mortgages Are Currently on the Property.
Many homes hold second and third mortgages. The more liens there are on the home the harder it then becomes for all the lien holders to come to an agreement on who gets what amount. The first mortgage is always paid first with a portion going to the second and if needed the third. But all lien holders must agree on how much they are getting and often the secondary mortgage companies aren’t happy with the amount left for them. A good listing agent and negotiating team can work with the banks involved to get them on the same page.
3. Know the Listing Agent’s Technique on Submitting Offers.
You never want to go with a listing agent that submits more than one offer to the bank. If they say they do run! This technique only causes more confusion and delays in hearing from the bank. The listing agent needs to collect the best offer with a well qualified buyer and then submit that ONE offer to the bank for their approval. After all, the bank only wants one offer.
4. A Good Short Sale Agent Will Make a Buyer Do Their Inspection Before Going to the Bank.
Some buyers hate this but it’s actually better for all parties involved –including the buyer—because it’s important to go to the bank with a solid offer from the beginning as opposed to going back once you have an approval and then the buyer does the inspection. It’s a $400 risk but one worth taking. In addition, as a buyer, wouldn’t it be terrible to wait 4 to 12 weeks for a short sale approval? Then once it arrives you do a home inspection and find out there is something wrong with the house that makes you not want to buy it. Now you have wasted at least a month for nothing.
5. Has the Agent Put a Package Together for the Bank?
This is a very important step to be taken very early on in listing a short sale. The listing agent should be sitting down with their clients and gathering information from them that the bank will need when making their decision such as financial statements, hardship letters, etc. As a buyer, it is important for you to know if any of this has been done ahead of time. If it has it shows that the listing agent is on the ball, is prepared for what is to come, and it will definitely help speed things up.
Your Dream Home Could Be a Short Sale Home
As a buyer, it is very important to know as much as you can about the short sale process. Currently there are over 25,443 homes for sale in Massachusetts of which about 25% are listed as short sales.
We know there are many more short sales on the market that are not disclosed (it is not yet mandatory to disclose but at some point in the future it will and should be). Yet it is definitely something that all potential buyers and their agents should be made aware of from the start of viewing a home so they can be prepared for the process. We think it is safe to say at this point there is probably at least an additional 3700 homes that are short sales on the market now that are not disclosed on MLS.
Looking at these numbers, your dream home could very well be a short sale and it shouldn’t be something you are afraid to pursue. The more educated you are the stronger you become in this market.
Purchasing a short sale can be a great benefit to a buyer looking for value in this market. It is estimated that short sale homes sell for 3% to 8% below the price for non-short sale homes.
With that discount and your down payment you are entering into a nice equity set up on your investment. It typically can cost a bank, on average, between 20K and 50K to proceed with a foreclosure; short sales for the most part are the best option for everyone.
All too often a buyer’s agent calls our office and asks, “Is the loan with Bank of America?”
The truth is it does not matter what bank it is when the broker has experience with short sales. Whether it’s Bank of America, GMAC, Wells Fargo, Citi, Chase, America Home Mortgage or whoever, it should not matter.
Remember it’s not the short sale itself to be leery of, it’s the agent handling it.
If the deal is in the right hands then it can be a fairly smooth and easy process!
Do You Qualify?
However, just because a property is listed with short sale terms, that does not mean the lender will accept a buyer’s offer, even if the seller accepts it.
Nelson, thanks for your comment! You are correct that there is no guarantee that the bank will approve the offer but we can tell you from experience that if the property is listed for sale correctly and the listing agent truly tries to obtain top dollar the offer will be accepted over 75% of the time on the first try.