The following article is printed from REALTOR magazine, and I think it does a great job of explaining what you need to know if you are considering making an offer on a Short Sale. Although Short Sales have been very common in other states in the past few years, it has only been recent here in Maryland where we are seeing the influx of Short Sales in our market. Here's what you need to know about making an offer on a Short Sale:
Are you looking to buy a new home? Are you thinking that now's a great time to find bargains? That's true, but it pays to know a little about the seller's situation before you make an offer.
If a home is being sold for below what the current seller owes on the property-and the seller does not have other funds to make up the difference at closing-the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.
A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.
You're a good candidate for a short-sale purchase if:
You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller's lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
Your financing is in order. Lenders like cash offers. But even if you can't pay all cash for a short-sale property, it's important to show you are well qualified and your financing is set. If you're preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
You don't have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property-or you need to be in your new home by a certain time-a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.
If you're serious about purchasing a short-sale property, it's important for you to have expert assistance. Here are some people you want to work with:
Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who's knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn't know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they've represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as "lender approval required.")
Title officer. It's a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic's lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you've waited for months for lender approval. If you don't know a title officer, your real estate attorney or real estate professional should be able to recommend a few.
Some of the other risks faced by buyers of short-sale properties include:
Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you'll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you've already negotiated, which may not be agreeable to you.
No repairs or repair credits. You will most likely be asked to take the property "as is." Lenders are already taking a loss on the property and may not agree to requests for repair credits.
The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.
* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR's strict code of ethics.
Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA. Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.
Copyright 2008. All rights reserved.
Open House Report for August 28 - 29: Catonsville, Ellicott City, Elkridge, and Columbia. Below are this weekend's Open Houses:
If you have any questions, please feel free to contact me.
Open House information has been provided by the listing agent, and is not guaranteed to be correct.
How to Get a 'Good Deal' on a House. There will always be Buyers that are willing to look outside of their price range and make a low offer. This happened to me recently when I received an offer on a home that was significantly below market value.
The home was already listed well below other comps, but the Sellers were willing to entertain the Buyers' very low offer and hopefully find some middle ground that would be amenable to everyone involved. We prepared what I considered to be an excellent counter offer, and one that most Buyers would jump at.
But we didn't hear a word.
Instead, the Buyers walked away from the deal, on to the next listing to lowball. When I called the Buyer's agent to find out what had happened, she said "Tim, this is what these people do. This is the third contract I've written for them, the third time it was a low offer and the third time they have walked away."
I won't comment on why this agent continues to work with these clients, or on their motivations as Buyers. What I will do is give a little bit of advice to those who are in the market for a home.
Everyone says you can offer anything you want for a home - it's up to the Seller if they will accept it. And this is true. You can write an offer for a million dollar home for $1 and see if the Seller will accept it (if you can find an agent willing to write it for you, that is).
Or, if you're truly serious about buying a home, you can look slightly above your price range for a little bit more house and make a low offer. This might be something you consider trying if you have looked and looked in your price range and simply aren't finding what you're looking for.
But if you are, in fact, serious about buying a home, be realistic, and be prepared to negotiate that offer to some extent. Just because a Seller has had their home on the market for 87 days does not mean they are going to give you their home for 30% less than market value. Be prepared to come up in price, or come down on concessions, or a little bit of both. Be prepared to go back to your Lender to get approved for ever so slightly more and see if your Lender thinks it might work. Be prepared to compromise.
When it's handled professionally, with great agents involved on both sides, a serious Buyer can negotiate a lower price on a home slightly above their price range, and come out of the deal feeling like a winner.
Open House Report for August 21-22: Catonsville, Ellicott City, Elkridge, and Columbia. Below are this weekend's Open Houses:
If you have any questions, please feel free to contact me.
Open House information has been provided by the listing agent, and is not guaranteed to be correct.
Helping Clients Buy, Sell and Invest in Maryland Real Estate for more than 25 years. Serving Baltimore, Howard and Carroll Counties.
For the past 25 years, I have worked tirelessly to identify what matters most to each and every client. I realize that while every client's end result may be the same (to buy or sell a home), your own personal motivations are often vastly different.
Your motivation - what's most important to you - is also what's most important to me. By asking thoughtful questions and connecting with your core values (what it is that matters to you), I am able to customize my approach and deliver a superior level of service.
Working with clients in Howard, Baltimore and Carroll Counties, I bring a fresh approach to what is often thought of as a "gut wrenching" process. I hold Realtor and Associate Broker licenses, as well as the GRI designation, and I pride myself on keeping my finger on the most innovative trends and research in the industry, something my clients benefit greatly from.
If you are looking to buy or sell a home, give me a call today to find out how strongly I feel that what matters to you, matters to me.
Tim McIntyre
Ellicott City Realtor, Catonsville Realtor
Serving Howard, Carroll and Baltimore County
for more than 25 years.
tmcintyre@cbmove.com
410-480-3555
www.timsellshomes.com
Testimonial:
I wanted to extend my thanks for the incredible service from one of your agents: Timothy McIntyre. I just completed the sale of my house in Arbutus. Since I live in California, Tim had to be my "man on the ground" for this sale. He went above and beyond, with no detail was too small or overlooked. He proved to be trustworthy, dependable, and responsive. He did an outstanding job with the sale, especially considering the market right now.
I employ about 100 people in my company. I wish that I had 100 "Tims" working for me. Thanks again!
Bob P
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