Today’s real estate market offers a unique opportunity for buyers. Never before have mortgage rates been this low, and along with lower home prices, buyers have kissed with bargains! One of those bargains is found when someone buys a short sale. A short sale occurs when a homeowner owes more on their home than they owe the mortgage company. Therefore, they are selling their home at a loss, giving the bank a short equity sale; “Sale of shorts”. This is also called being “upside on your mortgage.” To sell the home, both the homeowner and their mortgage company must agree to the terms of the sale, which generally increases the negotiation time considerably.
From the moment a buyer decides to bid on a short sale, to the moment they close and get their keys, it can vary wildly, although the average time frame is 3-6 months. In that time period, the listing agent receives an offer, various documents are collected from the owner and sent with the offer to the bank, and then the bank begins its process of negotiating the offer with both the owner and other holders of liens. and the buyer. The process tends to take so long because banks have no set requirements for these sales and because they are experiencing an overwhelming amount right now. The process can also be delayed if there are multiple mortgages on the home. In that case, all mortgage or lien holders must agree on the terms of the sale before a loss occurs.
If you are considering buying a short sale, the number one question to consider is “how long can I wait”. Some buyers make offers and move into their new home in two months. Others wait a year, only to find that the bank will not accept a short sale at all, the home subsequently goes into foreclosure, and the buyer is left starting the search for the home again. Some items to consider: If you are renting, when does your lease end? Do you have somewhere to live while you wait for the short sale to take place? How long will you wait on this sale before dragging your offer and moving on? Is your current home sold? Or do you have a home to sell before buying another home (this is important because banks do not accept contingent offers for short sales)? These are all important items to consider and discuss with your real estate agent before looking at short sale listings.
Although the process may seem scary, stressful, or lengthy, many buyers are finding it paid off when they close their new home – paying well below market value! Buying a short sale isn’t for everyone, but for those who decide, it can be a rewarding move in the end.
