When buyers are searching for a good deal on property for sale, they turn to short sales. A short sale means the seller’s lender is trying to release an existing loan by allowing a discounted payoff. You should know that the seller doesn’t necessarily have to be in default before a lender will allow a short sale. The lender may allow a short sale if the seller is current with payments, but the value of the property has fallen. When you see a piece of property with a listing price lower than your expectations, check with your real estate agent to see if the property for sale qualifies as a short sale.
The following are 6 basics you should know before considering the purchase of a short sale:
1. Check the Public Records
Doing research will help you to determine how much to offer. Your real estate agent can find out valuable information including who is in title, whether a foreclosure notice has been filed, how much is owed to the lender and the number of lenders.
2. Hire an Agent with Short Sale Experience
Don’t allow an agent without short sale experience to handle the transaction. Someone with experience will find all of the small details and help to protect your interests in purchasing the property for sale.
3. Qualifying the Property and Seller
A lender is unlikely to accept a short sale unless the seller has no equity and is unable to repay the difference between the property sale price and the existing loan. Sellers need to provide the lender with a hardship letter.
4. Give the Short Sale Lender Time to Respond
Make sure you get the name and phone number of a contact at the lender office and submit the offer to that person directly. Never send an offer blindly to a department. Give the lender a specified time frame to respond to your offer. Include a date that you will be free to cancel your offer if you hear no response. Most lenders can make a decision on an offer between two and three months.
5. Short Sale Commissions
The seller has nothing to do with commission in the case of a short sale. Lenders are the ones losing money on the property for sale, so they will be the ones to negotiate commission with the listing broker who will then share the commission with your agent. If you signed a buyer’s broker agreement with your agent, ask if the agent will waive the difference due or you may have to pay your agent out of pocket.
6. Reserve the Right to Conduct Inspections
The lender will not pay for items a seller normally would such as home protection plans, buyer credits or pest and termite inspections. A buyer will be asked to purchase the property as is. It is essential that a buyer obtain a home inspection to discover any major problems with the home prior to purchasing.
When purchasing a piece of property, especially in a short sale, make sure you weigh the costs and benefits to determine if the property for sale is the best investment you can make. If you have any questions about short sales or if you would like some more information on other types of properties, call AllAcres at (855) 227-3741 or contact us online today.