It seems that there is a significant amount of confusion when it comes to purchasing a short sale. There is a lot of confusion and misconception when it comes to these types of transactions, so below I have provided some information to potential buyers of short sales. If you are looking to purchase a short sale, understand that it is not the same as a normal sale and the approach is very different. There could be several parties involved and issues that are unknown to the buyer and buyer’s agent that can affect the transaction. If you are looking to purchase a short sale here is some helpful information.
1. On average to get a short sale approval it can take 60-90 days. There could be mortgage insurance and an end investor on the loan as well as the servicer, which means it has to go through three different processes. Bank of America could be the servicer on the loan but they do not actually own the loan, so, the short sale has to pass their guidelines, then go to the mortgage insurer if there is one, then to the end investor like Fannie Mae and Freddie Mac. If you are a buyer and can’t wait at least 45-90 days for an approval and then another 30 days to go to closing, then you need to look at other houses. The worst thing you can do is tie up a house that is in a short sale with no intention of being patient while waiting for a short sale approval.
2. There is a general assumption that you can purchase a short sale for 40-50% under market value. To that point you may be able to get a reasonable deal on a short sale, it will not be, in most cases, as much of a deal as you may be able to get on an REO (foreclosed property). The bank comes out and does a valuation of the property and will expect under market value, but will not except a huge amount under market.
3. Short sales are a very difficult process and it takes a qualified person to handle these types of transactions. With these types of transaction it takes a very experienced agent on the listing side as well as the buying side. Make sure before you move forward on the transaction that the listing agent has ample experience dealing with these types of transactions, or you could be tied up into a transaction for months that never goes to settlement. There are several different types of short sale processes and each bank’s process is different, it takes a professional who has had experience with all of these different types of short sales to help facilitate a successful transaction.
4. In most short sale transactions the properties are sold “as-is” and no repairs will be made. Although there are some exceptions to this rule, speaking in general, short sales are sold “as-is” and no repairs will be made even if they are found during a home inspection. In most short sale transactions the bank will require both the buyer and the seller to sign an addendum that states the property is being sold “As-is” and no repairs will be made.
These are just a few short pointers for buyers looking to purchase a short sale, if you need any more information contact me anytime.