World Wide Realty
J. "Diego" Marin
Buying Short Sales
   The ability to purchase a property at a reduced price is exciting! It can provide instant equity or passive income. When it came to purchasing "income producing property bank foreclosures (REO's and HUD's) were the norm. Now we have Short Sales. Is there a diiference? ...YES!
  There's no doubt that Short Sales have become common language these days. To the point that, not only are investors interested in them, but also owner occupants. What's the attraction? Especially when there has been so much negative media... one could hardly find them attractive. Short Sales are not completely understood, and this includes many in the industry. Consumers are left to arrive at their own opinion... The first thing one should know about Short Sales, is that there is nothing "short" about them... especially the "time" it take to buy one.
   Quite different from a bank foreclosure (REO), Short Sale properties are often still occupied and being maintained by the homeowner. Although we label it as "distressed property", it's really the homeowner that's distressed due to some form of financial hardship. In fact, many of these home are in good condition and the homeowners would love to stay in their homes, but are simply unable to do so financially. 
   While a Short Sale property may be purchased at a discounted price, it's important to remember  it's the open market that determines a fair market value. Most short sales start off competing at fair market value. The sales price is then adjusted accordingly to accommodate for their condition. However, if a home is drastically reduced in price or if a buyer submits a "lowball" offer, more than likely it will be rejected by the lender. Why? Because the bank is trying to recoup as much of the loss as possible. The banks know the FMV through an independent BPO's analysis or other recent sales records they have at their disposal. 
    Even so, I still see many buyers making lowball offers thinking they can "haggle" a little more and unknowingly set themselves up for rejection. This happens because the Buyer's agent themselves aren't any more knowledgeable than them. These are not foreclosures (at least not yet). It's important to know exactly what's involved in purchasing a Short Sale. From what to offer to how long it may take to close. A well assembled SS package can be approved and closed between 60-90 days.
   Ask the listing agent specific questions will help you determine if you should pursue a particular property. Here are just a few:
  • Do you have an approval yet? (Generally only happens when an offer is already on the table)
  • If not approved yet, ask them where in the process they are... (Have they assembled the complete the SS pkg and submitted for approval?)
  • How many lien holders are there? Have you contacted them all?
  • Ask if they are communicating in a "timely" manner. (Signs of trouble is when they aren't communicating with the agent)
  • Ask if they have multiple offers? Will they be accepting "back-up" offers? (The strength of your offer determines where in line you fall)
   Short Sales are more demanding on the seller than they are on the Buyer. The Seller has to prove a need to sell with documentation, that's regularly updated as the need may be. The Buyer simply needs to prove his ability and readiness to buy. All this at the Lienholder's digression.

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