Short Sales Triple Since 2008. Your Home Buying Opportunity?

Are you looking for a cheap way to buy a new home? Looking for a bank short sale might be the answer and according to a recent study, these deals are a lot easier to find these days.

CoreLogic, a Santa Ana, California mortgage and real estate research firm, just completed a study examining 250,000 single-family home short sales. The study included a number of interesting facts on this part of the mortgage market, including several that indicate home buying opportunity:

• Short sales have tripled since 2008
• There are nearly 400,000 short sales a year
• 55.8% of all US short sales occur in California, Florida, Texas, and Arizona

At this point you might be interested, but not quite sure exactly what a short sale is our how it can be a home buying opportunity. Let our mortgage professionals at Hall Financial Partners help define this discount home buying option.

What is a Short Sale?

Looking for real estate bargains in this housing market is not very hard, but some of the deepest discounts can be in scenarios when borrowers are facing foreclosure. These situations often create a short sale opportunity.

Short Sale – A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Short sales usually occur when the homeowner is facing foreclosure. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what is owed. -Nolo’s Plain-English Law Dictionary

It sounds too good to be true. A home coming on the market, with a motivated buyer that is willing to take less than the amount the home was originally purchased for.

Before You Buy a Short Sale

As with most “too good to be true scenarios,” buying a short sale comes with some cautionary advice.

Here is our brief short sale buying checklist:

1. Check Public Records - Your real estate broker can gather a lot more information on a short sale than the average home you might buy. Unlike a typical home for sale, a short sale is typically part of a foreclosure. This means that there will be public documents related to not only who is on the title, but also exactly how much the mortgage lender is owed–priceless information in generating an offer.

2. Get Short Sale Experience - Short sales are complex and involve several parties to complete the transaction. An experienced real estate broker, mortgage lender, and maybe even legal counsel can expedite the buying of a short sale home.

3. Know the Property and the Seller - A large part of getting a short sale done is the current homeowner’s (borrower) ability to convince the lender to accept a short sale offer, based on their financial hardship and current equity in the home. Therefore, you and your real estate broker need to carefully qualify the property and the borrower, before you waste too much time and money in working towards a short sale.

4. Send Your Purchase Offer to the Lender - If the seller accepts your offer you still need to get the lender to approve the short sale. This is where your convincing (sales pitch) needs to kick in. You will need to send the lender the purchase offer, copy of your earnest money deposit, and documentation that you have a pre-approved mortgage. Your real estate broker should also send comparable sales in the area to support your purchase offer price.

5. Patience is Necessary – Now you wait. The mortgage lender most likely has a complicated internal process to approve any short sales. You need to give them time to complete that process. However, make sure that you do set a time limit to cancel your offer so you can continue your home buying if the lender gets lost in their own red tape.

6. Short Sale Commissions - Understand that in a short sale the lender is paying the real estate broker commissions. And since the lender is losing money they are not likely to be motivated to pay “typical” commissions. Therefore, you need to negotiate with your real estate broker to make sure you aren’t “paying out of pocket” more commissions than you are willing to cover.

7. Conduct Inspections – Again, since the lender is getting the short end of this deal you are unlikely to get all of the benefits of a normal sale (except of course making it up with a deep discount on the home). That means you are not going to get customary home inspections, pest/termite inspections, and home protection plans. You are purchasing the home “as is.” We strongly suggest you still get all these inspections and insurance to protect yourself in the sale–understanding you are more than making up the cost on the short sale price.

Short sales can be a great opportunity to get an even bigger discount on that new dream home. Let a Hall Financial Partners mortgage professional help you negotiate one of these great bargains.

Here’s our number: 248-724-2200. Let’s get you approved with Michigan’s Top Mortgage Lender in customer experience.