When interested in buying short sale property it is always wise to be realistic. Although not impossible, the odds of actually having the purchase go through are as little as 0.1%. Property listed as a short sale isn’t for sale through a bank. The owner’s of the property are trying to offer their home at a low cost to get out of their mortgage obligations before foreclosure. Even if the house is listed way below value and seems “for sale”, that’s not exactly the case. The original lender has to approve an offer first. If you’re not going to enter into the process with a practical bid, then it’s best to not even bother.
Some short sales are priced so extremely low that it’s laughable. At 20-30% of the mortgage loan, these homes usually receive numerous offers from different buyers. The bank has no intention of accepting any bid at this amount. If you are prepared to come into negotiations with a fair price that’s close to current market value, you still may still have a chance to buy the short sale.
The first and most important step to buying a short sale is to do your research. Find out how much the seller still owes on the mortgage and how many liens are against it. Be sire to hire an agent that is an expert in short sales. The agent will be able to tell you who the lender is for the mortgage and how willing they may be to accept a short sale offer. Some banks are not as willing to participate in this type of sale. Others don’t have a problem with it. The short sale agent will be able to tell you which type bank you’re dealing with.
Your personal agent will not be allowed to communicate with the bank on your behalf. The listing agent for the short sale will submit all your information and your offer. If the listing agent isn’t familiar with short sale, it may not be a good idea to go forth with the process. Without experience, you risk the chance that your offer will be denied. The listing agent should have all financial paperwork from the seller in their package ready to be presented. This includes a hardship letter, bank statements, tax returns, check stubs and W-2 forms. When the listing agent doesn’t have these documents available from the beginning, you should consider that a red flag. Either the seller isn’t working with the agent to get their documents in or the agent isn’t familiar with the short sale package and hasn’t told the seller they need to be turned in.
Once it’s been determined that all documentation is accounted for and things are moving in the right direction, find out how many offers have been made on the short sale property. Short sales usually have an offer that is way below what the seller asked, an offer that is exactly what the seller asked for, an offer that is slightly higher, and one that is tremendously more than asking price. Although you won’t know the terms of these offers, it’s good to know how many they have so you are aware what you’re competing against. Your offer needs to beat theirs, but still stay under current market value.
It’s important to understand that even if your offer does go before the bank, waiting for short sale approval takes time, and someone could come along and outbid you. The agent representing you should be made aware if you are willing to raise your offer, so they can then pass that information on to the seller.