The Pros and Cons of Purchasing a Short Sale Home

Posted: December 19, 2011 in Repos (REOs), Bank Owned properties, Short Sales
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Short sales are receiving a bad rap in today’s market.  In many ways, rightly so.  They take a lot of time, and there’s no guarantee you’re going to get the house on which you’ve placed your offer.  However, purchasing a home via short sale can have its advantages.  As long as you don’t have to move right away, a short sale could be the way to go.  Short sale homes receive fewer offers than bank-owned homes, thus you have less people competing for the same property.  In fact, yours could be the only offer they receive.  First, it will take a few days to receive a response from the seller, but that’s the easy part.  The first thing you want to know is if the seller accepted YOUR offer.  If the seller had more than one offer, and accepted another offer, and your offer is in a backup position, then you want to keep looking for a home.  However, if the seller accepts your offer, and we know that yours will be the one submitted to the bank (the bank only wants to see one offer at a time), then you have an excellent chance of getting the home.  The most important thing in a short sale is that you must have patience.  Understand the banks are drowning in these homes.  Each bank negotiator is assigned hundreds of files, and every negotiator is different, some more competent than others.  The listing agent must put together a large package of seller documentation, along with your offer, and forward it the bank.  Once they have the complete package, the bank must establish the value, and it will send either an appraiser to appraise the property, or an agent to complete a Broker’s Price Opinion (“BPO”).   After value is determined, they must forward the entire package to each lienholder.  If there is a first and second loan, both of these banks must agree to the terms.  If there is mortgage insurance, that company must sign off as well.   Once they’ve deemed your offer acceptable, they will issue an approval letter, setting forth the terms to which they agree, such as price, escrow period, what they will and won’t pay, etc.  Then we open escrow, and proceed as normal.  Prior to receipt of the approval letter, the bank’s process could take weeks, it could take months.  However, if you know they’re working on your offer, the best thing you can do is sit tight and be patient.  You have a very good chance of getting that home.  While yes, you have to wait for a period of time, it could be much less competitive than attempting to purchase a bank-owned property and bidding against several other prospective buyers.


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