Is Buying a Short Sale Right for Me?
Many Buyers believe that buying a Short Sale is a "steal" or that they are getting over on the lender or lenders involved. This is quite simply not true.
While many Short Sales can be purchased for very attractive prices, consider the fact the the entire housing market has contracted over the last four years, and all property values have declined. So while purchasing a Short Sale may make sense for you, it does not necessarily mean you are buying a property under market value.
The most important consideration for Buyers to take into account when pondering a Short Sale is: "Does this home make sense for me?" Buying a Short Sale should make sense to you for all the same reasons that a traditional non-Short Sale would: location, proximity to transportation, public safety, school system, affordability, etc. Buying a Short Sale because it is "under market value" or because you perceive it to be a "steal" are not good reasons.
Can I Make a Low Offer on a Short Sale?
To make a low offer on any property is not advisable, but makes even less sense on a Short Sale. Your offer should be guided by your realtor and what the comparables indicate the value is, just like a traditional sale.
Keep in mind that when you make an offer on a Short Sale, the offer is subject to the Lender's approval. In almost every case, the Short Sale Lender will order their own appraisal or valuation of the property. If the appraisal indicates a higher value than your offer, the Lender will most likely reject or counter your offer. While it might seem like a good bargaining strategy to low-ball a Short Sale offer, the reality is that the Lenders are looking for market value or very close to it in order to accept an offer on a Short Sale.
How Long do Short Sales Take?
Short Sales have unfortunately been given the inaccurate nickname of "long sales" by some uninformed buyers, sellers and real estate professionals. There is no definitive answer as to how long a Short Sale will take before it is approved, as each transaction is unique. Some of the factors that contribute to approval timeline are:
- Number of Lien Holders involved
- Owner's Occupancy Status
- Whether or Not Taxes Have Been Paid
- Whether or Not there is Mortgage Insurance
That being said, on average I am receiving responses to my Short Sale offers within 30-60 days from the time a full application and offer is submitted. In 2009, it was taking on average 120 days or more, so the process has improved significantly. Banks now have large staffs dedicated to processing, reviewing and approving short sales. Some even have automated a large portion of the processing online, which makes the timeframes more transparent for parties involved.
What Other Considerations are there for Buyers of Short Sales?
There are other items that require carefuly consideration from Buyers when entertaining a Short Sale offer. Among them are:
- Timing: How soon do you want/need to close on the purchase? If you are looking for a quick closing, a short sale is not for you! In general, Short Sales can take three to six months to get approved and closed.
- Financing: Do you need a mortgage to buy a Short Sale? Most buyers do not purchase property in cash, so the answer is "Yes." Consider that your rate might expire while you are awaiting a response from the Short Sale lender, and you may need to re-apply for a mortgage once or twice while in holding mode.
- Condition: What condition is the property in? If you are not comfortable with buying the property in "as-is" condition, you may not want to buy a Short Sale. The seller may not have any funds available for repairs, and the Short Sale Lender, who is already losing money, may be reluctant to provide any repair credits.
Each Short Sale and Buyer are unique, and must be treated differently. If you would like to find out more about buying a Short Sale, please contact me at RosaAgencyRealtors@gmail.com or at (917) 518-7861.