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!
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