I’m a buying agent. So, I do my best to find my clients the best deal I can. Right now, the best deals are bank owned or Short Sale properties. Many people are in the process of losing their property to the bank. In order to avoid foreclosure, many times a seller will choose the Short Sale option. In this case, the bank sells the property short of what they owe on it, and take a loss.
While there is an obvious upside to purchasing a short sale in some cases, there are several things that are different when dealing with a bank, versus a regular seller. So, my job is to help you through the process, and let you know what you can expect.
- Many times listing agents list low, not taking into account what may be owed on the property between the first, second, and maybe third mortgages. Banks won’t start working on a file, or even attempt to negotiate with one another, or determine who’s going to take the hit, until they have an offer in hand.
- Just because you have acceptance from the seller, doesn’t mean you have acceptance from the bank. With a Short Sale, sellers know the bank is going to take the hit, so they accept the highest offer that comes in. But, that doesn’t mean that the bank will be satisfied with that amount. In the listing remarks agents always add the caveat on short sales, “offer subject to third party approval”. So the bank has the right to increase purchase price, and the price may even go higher than the list price. On one deal I was working on, the second came back and wanted $10k more, and told the buyer and seller to work out the difference. So, until you have actual third party approval, the contract is not accepted.
- It’s in the bank’s best interest to generate as many offers as they can. So, unlike a regular seller, the bank will continue to market the property until the bank or third parties accept an offer.
- The bank is in no hurry whatsoever. I’ve been told that the banks just aren’t able to keep up with the volume of files they have been forced to deal with. If your file is at the bottom of the pile, there’s a good chance that you’ll be waiting for 4-6 months for a response from the bank. My remedy is to make as many offers as you want. You’re under no obligation to purchase the property, and don’t need to put down any earnest money, until the bank approves your offer.
There is a real upside to buying a Short Sale. You can potentially get a property at well under value. But, if you are in a hurry, you’re liable to get frustrated. You may also feel like you got the ol’ bait and switch, when the bank raises the price on you right at the end of a 6 month negotiation process.
Still, I like representing buyers on Short Sales, but I don’t want there to be any surprises or unrealistic expectations.