FAQs: Buying Short Sales
Buying a short sale can be a very exciting endeavor. However, the process can be complex and takes more time than a regular equity sale. Patience and perseverance are both important when going through the short sale process. If you are willing to put the time and energy into buying a short sale, and you work with an experienced team like Lang Premier Properties, it's possible to walk away with a great home at a fantastic price.
Read over these FAQs, message us online or call 855-526-4466 to begin your short sale journey today!
What's a short sale?
A short sale is a real estate sale in which the seller is selling a property for less than the amount owed. The lender has to approve the sale, price, terms and conditions, as the lender is usually taking a loss.
Who accepts the offer?
The seller! It's up to the seller to accept the offer that is most likely to be approved by the lender. While this is often the highest bidder, that's not always the case. Like any home sale, the buyer and seller will negotiate terms and conditions, in addition to price. The seller has the right to reject offers that don't work for them.
Buying Short Sales: A Two Step Process
Step 1: An offer is submitted to the seller. If accepted, a contract is written and forwarded to the lender(s) for approval. Once approved, the lender sends an approval letter to the buyer with an expected closing date (usually 30 days).
Step 2: The buyer puts the financing together, usually submitting bank statements, pay stubs, tax returns and so forth to their personal lender. The buyer will also have the home inspected and appraised within the closing timeframe.
Tip: Many banks will negotiate the closing date, if needed, but approval for adjustment often takes 2 weeks. Check the closing date immediately upon offer approval and request an extension the same day.
How do I know what terms & conditions will be approved?
Every lender is different, which means there isn't a set guide for what will and won't be approved. However, there are common elements that are seen in most short sales:
Price: Short sale homes have been priced to sell and low-balling the listing price will result in rejection. There's still room for slight negotiation but the lenders aren't going to let a buyer walk away with an absolute steal. Even if a seller accepts a low offer, the banks have final veto power.
Credits: Short sales are sold "as is", which means lenders won't be paying closing, repairs, replacements or warranty costs. Buyers aren't able to negotiate a lower price or credits to upgrade the kitchen or repair damage, like they can in equity sales.
HOA Fees: Lenders aren't usually willing to pay HOA costs, including fines, fees or documents. The buyer and/or seller may be required to pay any delinquencies owed to an HOA.
Closing & Escrow: Once the lender looks at the signed contract between a seller and buyer and approves it, the home is now in escrow. Lenders often set an aggressive closing date of 30 days, so it's important to check this immediately. For example, FHA loans usually require 45 days for approval.
How long does it take to buy a short sale?
This varies greatly on a number of factors, many of which are out of the buyer's and seller's control. Be prepared to wait between 3-6 months, sometimes longer, to purchase a short sale from start to finish. However, working with an experienced short sale real estate agent will greatly reduce wait times and allow the process to be expedited as quickly as possible.
Can a buyer place offers on multiple properties at a time?
Yes, but it's advised against. Multiple offers can be considered a breach of good faith and fair dealing covenant if the buyer is only able to afford one home. This can void the contract or, if multiple offers are accepted and the buyer can't pay, result in a court case the buyer is likely to lose. If you do pursue multiple properties at a time, be sure to hire an experienced short sale real estate lawyer.
Is a buyer committed to an offer?
In Michigan, we often place a short sale addendum on the home specifying how long the offer is good for. If the buyer does not receive approval within that time frame, he or she can walk away.
If the offer has already been accepted, there is a contingency period after the lender's acceptance at which point the buyer is expected to do due diligence in completing the short sale. This includes receiving financing and completing inspections and appraisals.
As a buyer, what else should I know?
Who is the lender? Each lender is different and some are harder to work with than others. Knowing who the lender is and finding out their track record will help set your expectations on the timeframe and likelihood of approval.
How many liens are on the property? While the idiom "the more the merrier" may work for social gatherings, it's certainly not the case with liens on a short sale. Liens instantly make short sale negotiations more difficult. Each lien holder has to agree to the sale, usually expecting payment or a cut of the funds, which can complicate the process. Liens can be placed by additional lenders, IRS, utility companies, collection agencies, and so forth.
How successful is the buyer's agent? Having an experienced agent is often the difference between short sale acceptance and rejection. Working with a successful team like Lang Premier Properties, who has partnered with the Bank of America's top short sale vendor, will greatly enhance your experience.
Find out how Lang Premier Properties will help you buy short sales better! Contact us online or call 855-526-4466 to get started!