Finding, Negotiating, and Purchasing short sales
There are several different things to consider when buying a short sale
Your time frame: Buying a short sale can take anywhere from two to several months. Do your needs allow for this time frame? If possible find out how many lienholders there are on the property. The best scenario is that there is only one loan involved. Second would be more than one loan but with the same bank. The third would be that there is more than one loan and those loans are with different banks. Be aware that there may also be additional lienholders that need to agree to the sale. Depending on the situation, you could find yourself waiting several months only to be turned down. Short sales are generally not best for those who have to move within a specific limited time frame.
Are you looking of a bargain? Some think that a short sale means the bank will do anything to get rid of the property and avoid having to foreclose. This is not the case. Although the lienholder involved will perhaps take less than is owed it doesn't mean they will do anything to move the property. Usually the primary lienholder has a percentage of market value that they will accept. Depending on several factors they my negotiate what may be a great bargain. However that depends on current market conditions, the condition of the property, input from an independent agent giving a broker price opinion and input from the listing agent. It will also vary based on the opinion of the individual loss mitigation negotiator representing the primary lienholder.
The financial and emotional state of the seller: Having to go through a short sale is an emotionally draining process for the seller. Many think that all the negotiating takes place with the primary lienholder. The initial contract negotiation takes place with the seller before the lienholder ever gets involved. It is true that the lender has to give final approval to what they will accept as a purchase price but the seller is always the first step in the process.
Finding short sales: Our MRIS system requires listing agents to identify short sales. The agent can check "undisclosed" but saying "no" under the short sale disclosure if the property truly is a short sale is a violation of MRIS regulations. Also, in the state of Maryland if a seller is late on their mortgage 60 days or more it is considered a "material fact" and must be disclosed by the seller. If you are specifically looking for short sale properties we can determine that for you.
Negotiating an offer on a short sale: If you choose to make an offer on a short sale we will help you by showing you recent comparable sales of like properties. We will also discuss condition of the property and adjusting for any needed repairs. This will depend on the particular loan program you are using. Negotiation outcome may also be affected by the seller being involved in the HAFA program. This is a foreclosure alternative program which may determine whether the seller is allowed to offer any closing assistance.
Closing the sale: As stated above, timeframe is in the control of the lienholder. When a favorable decision is rendered by the lienholder they will usually give a specific timeframe for the settlement to occur. You need to be flexible and be ready to settle when the decision is received. You should also be aware that sellers have been known to walk away from the transaction at the last minute based on the settlement package sent by the lienholder. In some cases the terms may not have been clear or the terms appear to the seller to have changed.
Good faith deposit: In the event that the short sale contract you enter into does not close for reasons beyond your contol the contract would stipulate that your good faith deposit would be returned to you.
To sum things up we will help you with whatever transaction you choose but it is important that you go into the transaction well educated and with eyes wide open. You certainly can get some good terms when purchasing a short sale but it is not without risk.