Short Sale Expectations

With nearly 50% of the Atlanta market being distressed properties, buying a short sale is very common. But what does it mean to the buyer to buy a short sale? Firstly, there are certain expectations that you should be made aware of as a buyer.

Short sales can be a lengthy process and the buyer should be made aware of this. Perhaps by explaining the process it may make the buyer more comfortable.

The process of getting a short sale approved depends on the cooperation of a seller. In order to get the transaction approved, the seller must provide a bank with numerous documents including bank statements, financial statements, pay stubs, tax returns and much more. If the seller has provided the documentation and the agent representing the seller has delivered the package in a timely and efficient manner, the process could be sped up dramatically. Once the package has been delivered to the sellers lender, it will be reviewed by several departments and it could take anywhere from four weeks to twelve weeks. This is why it is important that the buyer understands the time frames involved as many transactions fall through due to buyers not willing to wait for the approval.

In a short sale the seller typically does not come to the closing with any money. What this means to the buyer, is that often, the bank who is pretty much controlling whether the transaction goes through or not, will not contribute to any repairs and often, contributions. However, a short sale is often priced considerably lower than what the market value of the home is or in many cases, it may be priced at market value, but the home may have many upgrades.

The advantage of a short sale in comparison to a foreclosure, is that the seller is required by the bank to continue to maintain the property until the sale date. Also in the short sale, even though the contract is binding at the time of signing the contract, the due diligence does not commence until after the bank has approved the contract. During the due diligence period, the buyer has the right to cancel the contract.

"One of the biggest mistakes I have seen," says Steven Betolatti, a Keller Williams Realty Consultants CDPE, "is buyers making very low offers on properties. Even if the seller agrees to the price on the original contract, the bank has to give the final approval regarding the price and conditions. It is always best to give your highest and most reasonable offer on a short sale offer since the bank can always reject the agreed upon price between seller and buyer only delaying the process even more. This is why I always will give my buyers a very extensive report showing what the home should sell for and advise my buyers to make their best offer if they are serious about purchasing that home."

With all this taken into consideration, is it a good idea to buy a short sale? Absolutely! But I do recommend that you use a certified distressed property expert to make this purchase. Certified distressed property experts have been trained thoroughly in the process of distressed home purchases and sales and will save much valuable time for all parties involved. You may find certified distressed property experts at www.cdpe.com.

We will examine how to determine if a seller qualifies for a short sale in our next post and why this is a better option than foreclosure.

Do you have questions regarding real estate?  Email Debra here and she will answer your questions on the next blog or privately.