A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.
Keep in mind Foreclosures are different than Short Sales. A Foreclosure means the bank owns the property. Banks are responding to offers on Foreclosures within 1 week, and many times they will accept a price less than current market value.
The first thing I look at when a client contacts me about buying a Short Sale is the days on market. If it is a new listing, perhaps within 30 days on market, then we probably have time to get your offer in and be among the first offers. If it is 50 days or more on the market, they most likely have multiple offers already, and they are waiting for approval from the seller’s lender.
Then I contact the listing agent to see how many offers they have. If they do have offers how long has the 1st offer been at the bank? Also, are they still allowing showings and looking for more offers?
We found that any time there are multiple offers; you need to be 2% or more over asking price to have a chance of buying the property. This sometimes holds true even if you are the 1st offer, because they might take 6 additional offers, and any offer that is higher than yours will be put in 1st position.
When submitting your offer you must have a pre-approval, and if you have a large cash down payment, you should include proof of cash too.
Many Short Sales still take 4 to 7 months for the bank to respond and let you know if your offer is accepted. However, there are some that have already done their BPO (Broker’s Price Opinion), and if you offer the price they are asking, they can approve the sale fast, perhaps within 7 to 14 days.
In addition, some banks are getting it together and approving Short Sales in less than 4 weeks.
Because it might take 4 plus months, never stop looking for other opportunities, even after you have placed your offer.
If there are two lenders that need to be paid off after the sale, then it will probably take a lot longer for a response, as they argue between themselves as to who should get paid what.
Keep in mind each bank is different and has different policies, and even big banks like Bank of America are adjusting their procedures weekly.
If your offer is accepted, you want to be prepared for a 30 day closing period, as most banks will come back and say they accept your offer and they want to close in 30 days. This is interesting, because on the lending side most banks say they need 45 days to close a loan. They normally will give you a small extension if everything is in order with your loan and your lender is just not ready to close. However, they do retain the right to cancel your transaction if you miss the 30 day close.
Unfortunately, the most likely outcome for most Short Sale offers is to not have your offer accepted. This is normally due to the bank choosing another offer over yours, or perhaps deciding not to accept any offers and just foreclosing on the property.
Sometimes you can be the #1 offer, but the bank still wants more money, so they counter your offer. If you do not meet their counter offer price, then they just go down the list of other offers to see if anyone will.
So the bottom line is it still makes sense to make offers on Short Sales, but you should understand the risks involved, in terms of time spent, and time waiting when you might not have the outcome you desire.
If you have any questions, you can go to my Website
www.OahuRE.com and hit the contact page to Email me.
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