If you are looking for a new place in Denver, and your price range is hovering anywhere in the Under $200,000 range, chances are you are coming across many Short Sales. Don't run away screaming, or refuse to look at thembecause with a little patience you could get a great deal. Plus, if you eliminate Short Sales from your search completely, you might find that you have very little inventory to shop from!
There are, however, some things you should know before you get started
1. Short Sales take a long time to negotiate. In reality, the œshort in short sale has nothing to do with timing. Short sales usually take many multiples of time longer than traditional real estate deals running anywhere from 2 to 10 months or even longer from contract to closing.
2.The only thing short in a short sale is the sales price. It is less than, or œshort of, the amount the seller would need to pay off all the loans and other outstanding obligations (tax liens, delinquent HOA dues, etc.) against the property. In these situations, unless the seller is willing to write a check to make up the difference, their lender(s) must agree to forgive the shortfall in order for the sale to close.
3.One in four homeowners in America owe more on their homes than they are worth. Short sales won't be going anywhere for a long time to come.
4.There's no such thing as œnormal in a short sale. Despite the recent goverment œstreamlining efforts that promised to impose a set of standards most banks would follow in processing short sales, it's still a black box experience for most buyers and sellers. Buyers submit their offers, sellers sign them and hand over all their financials to their listing agent who submits it all to the bank and then often no one hears anything back for a few months, if ever. Other times, the whole thing is approved in a matter of weeks (though this is much less rare).
5.The bank is in the power position, and can respond to your offer however they want. They may counter at a much higher price and demand a cash payment from the seller. Or not. They may take weeks, or they make take six months. They may approve a way-below asking offer, or require a hundred thousand over the asking price. Forget the idea of standard, when it comes to a short sale.
7. It's smarter for homeowners to short sell their homes than to foreclose, in most cases. Upside down homeowners often ask why they would bother with a short sale, when they could just walk away with much less effort and drama. The reality is that walking away and letting your home go to foreclosure is an extremely serious, personal decision the wisdom of which varies dramatically owner to owner and state-to-state. Some states allow lenders to sue homeowners who default on their mortgages, and impose state taxes on the mortgage debt cancelled out in a foreclosure, sometimes totalling tens of thousands of dollars. Other homeowners' family and financial plans would be impaired much less by a short sale than by a foreclosure. For still others, it's pretty much a wash. For everyone, though, it is faster to recover your credit and ability to take out another mortgage on a new home after a short sale than after a foreclosure.
Given that a short sale costs a seller little or nothing except some time and effort, in many instances it is smarter to make the effort to short sale than it is to walk away.
8. A short sale is not the same as a pre-foreclosure. A short sale is a home being sold for less than what is owed on it. A pre-foreclosure is a home that is in some stage of the foreclosure process because the owners are behind on the mortgage payments. Many short sales are pre-foreclosures, because the owners stopped making payments when they put the home on the market, either because they can't afford them, they are simply done with the property and don't see a need to continue paying on it, or because they feel the bank is more likely to approve their short sale application if they are in default on their loan (a position many experienced short sale agents argue is true). But not all. Remember, nothing is standard when it comes to short sales. Short sales are closed every day on which the seller is still in good standing on their loan these are mostly the short sales of owners who elect this strategy out of a desire to maintain their credit as much as possible, but have to move for work or family reasons.
9. Not every short sale will come on the market later as a foreclosure. You should inquire as to any foreclosure notices against the property, and keep track of those time frames. Many buyers have been surprised when the bank auctions a property they are in contract to buy.
10. The price you offer is not as important as several other factors, including the bank's perception of the home's fair market value, the seller's financials, the completion of the seller's workout application package and follow-up by both the seller and the listing agent.
11. The seller's bank in a short sale is being asked to waive debt that they are legally owed. They have the absolute right to simply refuse entirely to accomodate this debt forgiveness request. However, if they do choose to waive some or all of the shortfall, they also have the right to place whatever conditions on that waiver. They can ask for more money from the seller or the buyer. They can ask the agents to reduce their commissions. They can refuse to pay various closing costs. And the buyer or seller can counter, accept or refuse any or all of the bank's demands, too, but know that the banks do have the right to place whatever conditions on the short sale they want.
Read more about this subject:
Socials