I was having a conversation today with a client (realtor) and the subject of buyers on short sale properties came up. I used to say with all honesty that I feel sorry for buyers on short sales. Its a tough market to look around for months to finally find a property that you like only to spend 6 months in negotiations with the bank and have them decline the offer because you can’t reach an agreement. That hurts and I do honestly have a softspot for people that have been through that process. Lately though my opinion has started to change. Let me tell you why.
The market in its current incantation has been around for a few years and short sales are not the new kid on the block anymore. Not that they ever were the new kid on the block, I mean they have been around for years its just they weren’t always so prevelant. Anyway just like any other aspect of the real estate industry there is now plenty of information and prior experience out there for any buyer to make an informed decision on what property they are purchasing and who is part of that transaction. This goes the same for sellers by the way but thats a whole other issue that requires a post of its own. So now the question is; Since short sales are going to be a major market driver for at least the next couple years what can a buyer do to make things smoother or at least more palatable?
The answer: Be informed, very informed.
Ask the right questions when putting in your purchase contract.
Who is/are the bank(s) involved?
Is the Association past due?
If so by how much?
Take this information and do some research. Ask your agent what the timelines are based on the answers. If you are an FHA buyer purchasing a property with 2 mortgages and 20k in unpaid association dues you are most likely wasting your time unless you have written agreement from the seller that they will cover the unpaid costs. You have to do what you can to avoid the unexpected. The unexpected being waiting for 6 months for someone to tell you an additional 10K in cash is needed to close. That someone is likely my company and its a phone call or E-mail that unfortunately has to go out.
What buyers truly need to understand is that sometimes there is nothing that can be done to get everything paid by the bank. If you’re a cash buyer and your offer is 25% below market this may not be that big of a deal. You can pay the excess and still get a good deal on the property. Even then though you should be prepared. It kills me to see everyone work on a file for months and then have it fall apart at the end because the primary lender is only willing to give 4K to the second but they won’t release for a dime below 8k. Being informed doesn’t reduce this possibility but it does make it easier to deal with when you know its coming. We close hundreds of short sales a year with all sorts of buyers. The most succesful ones understand what they are getting into. They understand what type of buyer they are and how much they are willing to spend. They also understand what is involved in a short sale and how the particulars of their specific property will effect the final outcome.
I guess what I am saying is that the information is out there for buyers to make an informed assessment. It doesn’t mean if you do your research that everything will work out as expected but every little bit helps. Decide what kind of a buyer you are and make purchasing decisions based on that profile. If you don’t understand how to do this there are plenty of great realtors who have plenty of experience that can help. If you don’t know one give me a call I know quite a few I can refer you to.
