Top 5 Tips for Short-Sale Buyers (In Any Price Range)
March 22nd, 2009 Categories: Market Trends
You may be interested in making an offer on a property that is listed in the MLS as a “short sale”. My highly educated, former physician father recently asked me exactly what that term meant and how it differs from a “foreclosure.” His question offered me a glimpse that our Realtor-lingo isn’t always understood by the general public.
In Denver, we’ve seen many more homes come on the market lately as short sales. Here’s a list that could help you if your dream home happens to be a “short sale”:
1. Make any offer you deem reasonable. When a house is on the market and the seller owes more than he can sell it for, but it’s not in foreclosure yet - you’ve got a short sale. The seller and his broker will need to negotiate with the lender(s) holding the notes to accept a shortage. Also called a deficiency. The seller’s real estate broker will try to get as much for the house as possible because that’s her job. But you can offer anything you want (don’t make it ridiculous and waste everyone’s time) because ultimately it’s the bank that will be deciding how much they’ll write off.
2. Prepare to wait weeks for an answer. Sometimes weeks and weeks. The bankers are either overwhelmed by the piles of short sales and foreclosures on their desks, or they’ve got their heads comfortably resting on those stacks of files with zzz’s in a little bubble over their heads. You decide which.
3. Don’t expect much on the inspection negotiations. The banks usually want the sale to be “as-is.” This doesn’t abrogate your ability to conduct an inspection, and you always should. However, prepare to fix most of what you turn up yourself. They sometimes surprise us and fix a few items, so you can always submit a list. Just be prepared to make the decision to move forward without most repairs. Remember, the seller is fast approaching foreclosure, and probably doesn’t have any money available to fix anything either.
4. Know what a “Deficiency Judgment” is. For years, banks would file a judgment against a seller for the deficiency in the repayment of the loan. Even though the bank agreed to accept a short sale, they still wanted some sort of repayment. They would negotiate with the sellers to repay in small amounts over several years as an unsecured note. The hammer they held over the seller was a recorded judgment of deficiency. Not as bad on your record as a foreclosure, but still not great. Lately, we’re seeing more banks just writing off the deficiency, and not requiring a seller to repay it or assume a deficiency judgment. Depending on the bank’s stance with the seller, you may have less negotiating room when the seller is faced with repaying the deficiency.
5. Have your own loan lined up and ready to go. You wait and wait for an answer, and then you get the o.k. Now you’ll need to hurry up and get the property closed. Once the bank approves the short sale, they typically want it closed right away. Have your ducks in a row so you can move quickly.
Short sales happen in every price range. I typically work with higher end clientele, often cash buyers, and still we’re seeing short sales crop up. If you find your dream home and the seller is struggling, have some sympathy and then go in and get a great deal!
Search Denver properties on my fabulous website, www.gretchensdenver.com. You’ll have access to nearly every available property in the Denver MLS, be able to map properties, and find relocation information too!
Buying a foreclosure or short sale? Read here about easy remodeling tips!
you might also want to add - make sure you have no judgments or up-coming judgments. We have a short sale we just negoiated with all the banks then there was 4 judgments in line we didn’t know anything about either
Jason, you are absolutely right on. There can be sneaky judgments you don’t find out about right away.
Thanks for the outline.
Insightful subject, I found this right in the perfect time. I’m going to have to save this post for future reading. :-).
Short sales seem to be the hot thing in real estate lately. There are alot of sites and spammers out pushing that keyword. I guess that comes with the state of the real estate market. You have to get creative.
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I wish I had found this site before I tried tried to a short-sale. I learned the hard way.
Ahhh i get it, could never quite get the hang of what the difference was between foreclosure and short sales. Great advice by the way
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Short sales are the hot word right now but there are also other opportunities in real estate. But all the info is going towards short sales. Thanks for the post it helped me understand real estate a little better also.
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I think this is really an interesting thing because I have seen so many people are associated with that. I think this is one of the best thing to discuss. Anyways keep it up and keep continue with your valuable thoughts.
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