There are many misconceptions when it comes to a SHORT SALE transaction, so below I have provided some info to potential buyers so they can understand that it is not the same as a normal sale and the approach is VERY different. There could be several parties involved and issues that are unknown to the buyer and buyer’s agent that can affect the transaction.
1. On average, to get a short sale approval, it can take 60-90 days.
There could be mortgage insurance and an end investor on the loan as well as the servicer, which means it has to go through three different processes. Bank of America could be the servicer on the loan but they do not actually own the loan, so, the short sale has to pass their guidelines, then go to the mortgage insurer if there is one, then to the end investor like Fannie Mae and Freddie Mac. If you are a buyer and can’t wait at least 60-90 days for an approval and then another 30 days to go to closing, then you need to look at other houses....Fortunately, I have had one that closed in 36 days from the offer!
2. Can you purchase a short sale for 40-50% under its listed price?? In a short sale the bank comes out and does a valuation of the property and will expect a slight discount, but will not accept a huge amount under the market value.
The bank will usually be willing to negotiate on that price, but will not, in almost every case, take 40-50% off of that price. To that point, you may be able to get a reasonable deal on a short sale, though it will not be, in most cases, as much of a deal as you may be able to get on an REO (foreclosed property). Also to that point, most short sales will be in better condition than an REO.
3. Short sales are a very difficult process and it takes a qualified person to handle this type of transaction.
With this type of transaction it takes a very experienced agent on the listing side as well as the buying side. Make sure before you move forward on the transaction that the listing agent has ample experience dealing with these types of transactions, or you could be tied up in a contract for months that never goes to settlement.
These are just a few short pointers for buyers who are looking to purchase a short sale as they are a reality in every market, and if you have the patience you may be able to get the home you are looking for at a discount!
Sean S. Williams
Licensed Broker, Realtor®, ABR®, e-Pro®
1st Time Buyer & Relocation Specialist
of Louisville, Kentucky
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