All Parties Can Benefit from a Short Sale

Buying a short sale property can be advantageous to all parties involved. The bank benefits by not having to complete a costly foreclosure process, then having to maintain, insure, and sell–or auction–the property at an amount that is usually less than the amount received through a short sale. The homeowner is completely freed from the burden of an unsustainable mortgage with far less damage to their credit. The short sale allows them to purchase another home in 2 years–instead of 5 years compared to foreclosure–with more relaxed lending requirements.

The buyer is able to purchase a great home at a great price. Most short sale listings can be successfully purchased at an 8-10 percent discount in most markets, which is oftentimes a better discount than buying bank-owned–REO–listings. When compared to bank-owned listings, the majority of homes being sold as a short sale are owner-occupied. This means there is a greater probability the home will be in move-in condition after closing. Your SSAA-certified agent can help you locate and make offers on homes that are listed as short sale properties.

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Understanding the Buyer’s Role in a Short Sale

The buyer plays a key role in the successful approval of a short sale. When an offer is made on a short sale listing, the seller’s listing agent will send the buyer’s offer to the seller’s lender for a review. The lender will compare the buyer’s offer to the value of the property and decide whether or not to approve it as a short sale.

There are a few key stages the buyer should know about as their offer goes through the short sale process. Many buyers wonder what is happening during the process and how long it will take for the seller’s lender to review their offer. What most buyers may not understand is that each short sale transaction is unique and may or may not follow a specific timeline. The buyer should follow up with the seller’s listing agent to verify that the following steps in the short sale process are completed in timely manner:

The above-mentioned timelines will vary between transactions depending on the complexity of the sellers’ mortgage loan type, their lender, the number of liens on the property, and the quality of the buyer’s offer. The majority of short sales across the United States are getting approved by short sale lenders in approximately 90-120 days.

If you need to be in a new home within a specific period of time you need to decide whether or not purchasing a short sale is right for you. Making this decision early will be especially important for the seller of the property who is facing foreclosure. Accepting a legitimate offer from a qualified buyer gives them the best opportunity to prevent foreclosure and move on with their lives with a brighter hope for future homeownership.

Keys to Submitting a Good Short Sale Offer

1. Make sure you are pre-qualified for your new loan and have the documentation to submit with your offer. If you are paying for the property using cash, submit proof of funds with your purchase contract.
2. Submit an offer that is near the “as is” value of the property. That’s anywhere between 92-100 percent of the property value. You should understand that submitting offers lower than 92 percent of the as is value may extend the timeline of the transaction and could result in months of added negotiations to approve the transaction.
3. Once the BPO has been ordered and completed, be ready to complete your inspection and appraisal very soon. One thing you want to avoid during the short sale process is receiving an approval and not being able to close within the 30-45 day time limit conditioned by the short sale lender. Do your due diligence while the file is being processed to save time at the end of the transaction.