If you are reading this article, you may be considering entering into a short sale agreement on a home. If this is you and if you are completely excited over a potential deal on real estate, give yourself a moment and take a step back. There are certain items that you must remember before entering into any short sale agreement.
You must know all the facts about a piece of property before you consider if a short sale is worth it and it is good to immediately place a call to your real estate agent to ask for their assistance in this process.
Rules of Buying Distressed Property
It is important to remember that the rule of averages states that only about 3 or 4 in every ten short sales inevitably close. This is because regardless if a piece of property is listed well under the market value of a neighborhood, the seller's bank is still not under any obligation to agree to an offer or sell the property.
If you see a listing that is very low, understand that there may be intense competition on the property and this is sometimes used as a selling tactic to drive interest and increase attention given to a piece of property. In fact, analysis of recent market data show homes that are priced very low, typically sell closer to market value than a home that is moderately priced.
Next, make sure you ask your real estate agent to fully investigate the property and determine just how many lenders are involved and how many mortgages are associated with home. The more mortgages or liens on a property the less likely it will be closed as a short sale. In addition, if your agent is experienced with short sales they will be aware and understand which brokerages use this as a sales tactic and which are easy to work with when it comes to a short sale purchase. They will be able to inform you whether or not this is something to go after.
Common Pitfalls
It is important for you to also look at the statistics associated with the listing agent. If they are experienced, you should see that they have closed some with regularity. If they have not this could be a bad sign for you as a buyer. The reason is because your buyer's agent can have no discussion with the bank about this short sale and that it is up to the listing agent to actually submit offers on a short sale to the lender. If they are unable to do this, you run the risk of wasting your time.
In addition, you need to find out if the seller has received approval to enter into a short sale. This goes back to the principle that just because the seller wants to offload a piece of property and a loan does not mean their lender will ultimately approve the sale. There must be an approval process that is met on behalf of the seller to their lender in order to make this deal happen.
Michael Tayler
