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Step 1
First, you need to find an agent who knows how the short sale process works and who is willing to ask the tough questions. Unfortunately, the reality in today's market is that a large percentage of short sale listings simply will not sell. Either the seller will not qualify for a short sale or one or more of the lien holders is not motivated to settle for less.
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Step 2
Understand that the list price is generally decided upon solely for the purpose of generating an offer. Most banks will not even review a homeowners request to do a short sale until there is an offer on the table. Many Buyers submit an offer at the beginning of the short sale process and then patiently wait for a response from the bank, only to find out that their offer was much lower than the market value of the home and the home is sold to another Buyer who made an offer closer to the market value vs. the list price.
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Step 3
Some agents indicate "approved short sale" on their marketing materials, but what does "approved" really mean. It could mean that the homeowners loan modification was denied and the bank said "you might want to try a short sale". It could mean the 1st lien holder has agreed to the short sale, but the 2nd and 3rd have not. If it actually means that all lien holders have approved the short sale, but the initial buyer is no longer interested, this could be a great opportunity for you. You need to make sure you know what "approved" means.
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Step 4
Proceed with caution before opening escrow or spending any money on your inspections. I advise my HomeBuyer Clients not to invest any $$ until we have a copy of the written approval from all lien holders, the Seller has signed the purchase contract and whenever possible, we have reviewed the preliminary title report.
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Step 5
You must have your financing ready to go once the approval is received. Often times, you will wait months for an approval and then the bank will demand a fast closing, some even include a per diem fee for closing late.
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Step 6
Remember why the homeowner is selling as a "short sale", it is a distress sale which usually means there is no money to make any repairs to the property. Sometimes all the appliances are removed from home and maybe even the light fixtures and the window coverings. In extreme cases, I have seen built-in bbqs, large trees and kitchen faucets disappear from the home right before closing.
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Step 7
If you are looking for one perfect house, a defined timeline and a smooth closing, buy from a regular seller and keep your sanity. If you are flexible regarding the house, the timeline and can take the ups and downs of the process in your stride, consider a short sale.
Comments
TopBrokerOC said
on 5/5/2009 Concise, factual information. Thanks!