Walking Tall Through Buying Short Sales
We're hearing a lot about short sales these days and in an earlier blog we addressed the issue of selling homes under that plan. Buying such property also offers fresh challenges and the true professional agent owes it to the client as well as to themselves to work carefully through the process.
Banks sometimes pay lower commissions on these “short sale” properties but despite that, most sales associates will show prospective buyers all homes available (including short sale homes) that meet the customer's specifications. Gena Riede, a successful Realtor in Sacramento, California , takes seriously her pledge of service and performance as a Realtor.
On working with short sales, she says “Yes, it's double the work but you never know when that one bank will come shining through with an acceptance. So, I'm willing to do the extra work and go the extra mile for my home buyers, if they truly love the house that is in short sale. I feel that I have a duty to my client to show all homes whether in short sale, bank owned or for sale by the actual homeowner.
As far as the market downturn goes, Riede reminds her colleagues that if it's any consolation, every ten years real estate goes through this correction and it is still a very good sound investment to buy real estate. Many of those going through the short sale and foreclosure process right now are learning how important it is to have a good loan and not be over extended as well. She stressed the importance of dealing with reputable professionals.
She encourages those many home buyers who are still out there buying homes and getting good deals: “I applaud you, you took the first step toward the American Dream of home ownership, you made sure that you were working with a professional who put your interests ahead of their own and you are getting in before interest rates rise and home prices go up. You will be sitting pretty!”
Riede has two first-time home buyers right now, who before even signing on their new home, were pleased to find the appraisal for their home was $40,000 more than they paid- pure equity. “Those are some very happy new first-time home buyers,” she said in comments on her website.
Some Tips for Buyers
Meanwhile, here are a few tips for buyers looking at short sales properties:
The key words in the Multiple Listing Systems around the country are "third party approval required," or "bank approval required," which signals that the sale of the property you're looking at is actually controlled by the mortgage holder rather than the deed holder.
Before you get involved in one of these transactions, understand what they are not:
- a short sale is not simply a sale of a property for less than the original purchase price.
- It is not necessarily a "pre-foreclosure."
- It is not always a good deal.
However, some short sales offer great opportunities. Some of the properties look terrific, and are in prime locations. Some lenders offer closing costs. It is not uncommon for banks to offer selling bonuses just to get the house off their books.
Conversely, they can also be some of the toughest deals to get through to settlement if the lender has lost too much money already and just wants to wait out the buyers until one comes along who's willing to buy the house in disrepair with no closing costs.
Do your homework before making an offer, yet remember that a “low-ball” offer may be rejected because the lender already has lost a considerable amount of money. If you think it's overpriced, as sometimes is the case, then make your offer at what you believe is the market value. Offer the full price if the property is, in your opinion, priced below the market.
If you are writing a full price offer, protect yourself with the appropriate contingencies, including inspections (home, pest, radon, etc.), appraisal, and financing.
Make a thorough walk-through inspection. Don't rush through this essential fact-finding mission. Become fully aware of the condition of the property by using a qualified home inspector. Ensure that the utilities are on so you can test plumbing, electric, heating and air conditioning. You should flush a few toilets, run the dish washer and check other appliances. Examine the walls, baseboards, ceilings and floor.
Finally, be patient. Because of the increasing number of mortgage defaults, lenders want to move these properties quickly.