We here at Sunshine Realty are very well aware that most people wanting to buy a home are looking for a good deal. That’s half the fun right, seeing how much less you can get the home for under list price. We also have quite a few experiences with foreclosures and short sales. People seem to be at odds when it comes to the correct information about short sales. Therefore, we’ve decided to put in our two cents, or 5 tips :). Here you go!
5 TIPS FOR BUYERS LOOKING TO INVEST IN A SHORT SALE:
1. KNOW THAT IT IS GOING TO TAKE AN AMPLE AMOUNT OF TIME TO BE COMPLETE.
We know that it is easy to get anxious when purchasing a home. However, when we have buyers looking for a short sale, we make sure they understand that it is roughly a 6 month process. It includes NUMEROUS steps that you have to get through. There are several negotiation stages with not only the seller, but the bank as well. Fun fact: about 40% of people in the process of purchasing a short sale back out before the deal is complete because it is taking too long and they are backed in a corner when it comes to moving. Which leads us to #2 :).
2. MAKE SURE YOU DON’T BACK YOURSELF INTO A CORNER.
Because a short sale takes such a long time to be complete (can even take up to a year if the bank holds it up), we always, ALWAYS recommend that if you are selling your home and hoping to move into your short sale, to have a back-up plan. We once had a client that was purchasing a short sale and decided to put their home on the market because they thought it may take a while to sell. Even against our recommendation to hold off, they went ahead and listed. Guess what?! Their home sold in 2 weeks and it was set to close a month and a half later. Mind you, this was 4 months into their short sale purchase. Well, the closing of their current home went by and their short sale purchase was still pending. They called us daily with panic attacks because they didn’t know where they would go for in between their sale and purchase. They ended up having to live with parents for a few months because they listed their home with no back up plan. Don’t let this happen to you! Have a back up plan!
3. KNOW THAT YOU ARE NOT ONLY NEGOTIATING WITH SELLER, BUT ALSO THEIR LENDER!
We touched a bit on this above. However, this subject is due a bigger discussion. When buying a short sale, you first negotiate with seller and their agent. They can essentially agree to whatever price they want. However, because it is a short sale, their lender can override your contract and change the purchase price based on what they would like in turn. Even if you are 3 months into your purchase contract, the bank can override the price and send you a letter stating you must purchase the home for “x” amount in order to close on your purchase. So say you and the seller agreed to $200,000.00. Based on appraisal and what they are due, the bank can up and change that amount to $215,000.00 which could risk your purchase if you can’t or won’t agree.
4. KNOW GOING INTO YOUR PURCHASE, MOST SHORT SALES ARE SOLD AS-IS.
This one is exactly how it sounds. When you walk through the house and see what you do and don’t like…that’s how you are purchasing it. You do have every right to do your own inspection and back out if you so choose after that. However, where with most deals you do the inspection and negotiate what the seller will fix and what you will take over, you will be taking over all of the fixing necessary with short sales. Don’t let this surprise you. Be ready going in knowing that you will most likely need to make some repairs.
5. BE PREPARED TO JUMP THROUGH HOOPS.
Enough said. When dealing with the agent, seller AND their lender, there are going to be obstacles to avoid. For instance, YOU will be responsible for turning on all utilities with separate companies as needed to do your own inspection which may come at an additional cost to you to turn on for a day. They’ll also need to be turned on for appraisal. Be prepared :).
If this is something you are considering, we hope this lightens your load a bit and helps you with the process! Remember, if you need help, we are here if you need an agent! Call us to find out anything more you may need to know and start looking. 636-248-2801.
Have a SUNSHINE rest of your Saturday!!