Wilmington and Burgaw Area Real Estate News

When people write about short sales, they often speak about the homeowner’s options and the requirements to qualify. They don’t usually address the buyer’s side of the transaction and what they should expect. As a result, buyers are often confused and frustrated when they enter the short sale process. Here are five tips for buyers on what to expect when they make an offer on a short sale:

1. A seller-signed offer is not a finalized contract. In a normal offer process, the listing agent presents the sellers an offer from the buyer’s agent. Negotiating takes place and the sellers sign the contract accepting the offer. Then, inspections take place, followed by the closing. However, in a short sale the sellers sign the contract initially, but the bank does the negotiating and closing doesn’t take place until the bank releases an official acceptance letter.

2. More than one offer will be accepted. Until the seller’s bank formally accepts the offer and approves the short sale, offers will be accepted and submitted. How those offers are approached depends on the bank. Some will only look at one offer at a time. Others require that all offers be submitted at once, so they may accept the highest in order to minimize their loss. When placing an offer on a short sale, it’s good practice to offer the highest and best price. This will increase the likelihood of it being accepted.

3. Short sales are not “deals”. They occur when a homeowner owes more than what the home can be sold for. The appearance of short sales has greatly increased over the past two years, because the housing market has taken a huge hit with homes falling in value. A home bought in the $600s in 2005, could very well be sold in the $400s today. So, in reality, short sales are being sold at fair market price.

4. The sale may be short, but the wait is long. When agents say that a short sale takes 3-6 months, they aren’t exaggerating. If a buyer needs to move within 3 months, it is not recommended that they make an offer on a short sale. It’s a lengthy process, because there are multiple parties and departments in and outside of the bank (mortgage insurance companies, investors, negotiators, etc) who need to communicate with each other and come to an agreement on terms. How many there are depends on how the mortgage is structured. This all funnels down to one negotiator, who speaks with the listing agent or attorney handling the short sale for the seller. It isn’t uncommon for halfway through the process to get a request for additional documents or information from the seller or buyer. This will delay the process too, so it’s important for a homeowner to use a listing agent and/or attorney who is well experienced in short sales and can foresee what information will be needed. The only exception to the long process is when the short sale has already been preapproved by the bank.

5. A buyer can back out anytime. While there could be repercussions if a buyer backs out at the last minute, if they find a home while waiting for short sale approval from the bank, they can rescind their offer. A signed termination form is required, but earnest money will be refunded.

Buyers who make an offer on a short sale should realize that communication with the bank is very limited, especially before the property is assigned a negotiator. The selling agent or attorney can go for many weeks without hearing anything from the bank. Patience is key. While that is easier said than done when making such a large purchase, buyers should prepare themselves for the approval process.