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Saturday, 13 July 2013 04:50

Understand Short Sale

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Understand Short Sale 

  • article credited to Prudential Locations LLC
  • 1. Your rights as a buyer are very limited when dealing with a short sale property.

  • Even if the seller accepts your offer and signs the contract, the lender must provide the final approval for the transaction. We have seen short sales in which the lender has cancelled the transaction on the same day that it was set to close. This can be very disappointing and costly because buyers have no recourse, and are unable to recoup any of the costs incurred during the escrow period such as home inspections and appraisals which can end up costing the buyer thousands of dollars.

    2. Your closing date should be flexible.

    The short sale transaction process is anything but short. We have seen short sales in where it has taken up to 6 months to process and close the transaction. This time lag can be especially detrimental in today’s buying environment, where interest rates can change at any time. An increase in interest rate during the escrow period can adversely affect your mortgage payment amount by several hundred dollars per month, which may result in the property becoming unaffordable for you.

    3. Short sale sellers try to secure as many offers as possible — even after they have an accepted contract — which keeps buyers in limbo.

    Normally, when a seller accepts an offer, the status of the listing is changed from “Active” to “Pending.” The difference with short sales is that in most cases, the seller will keep the property marked as “Active” after accepting an offer, with the intent of attracting more buyers so that they can get an offer that is higher than the one they initially accepted from you. If they do receive an offer higher than yours, the bank is extremely likely to accept that higher offer, and you would essentially be out of luck. We have seen short sale transactions in which up to 3 buyers have all had accepted offers from the same seller, and all 3 buyers had to wait months to hear back from the lender as to which of the offers the lender would accept.

    4. You will need to bring additional funds to the closing table to pay for the seller’s closing costs.

    In a normal real estate transaction the seller pays their own closing costs, which include termite reports, title fees, recording fees, and pro-rated property taxes. In a short sale, the buyer may need to pay for most or all of the seller’s closing costs because there is no equity for the seller to use to pay for their closing costs.

    5. You will need to do a lot of follow-up.

    It is essential to monitor the lender during a short sale to make sure that there has been a stay placed on the foreclosure action. This information can be difficult to attain, and if the property isn’t monitored effectively, it could go into foreclosure, and be taken off the market — even if the seller has accepted your offer. Once again, having a me or my recommended specialist to work on your team can save you time and leg work.

    6. Your closing must be completed quickly.

    Though approval from the lender can take several months to receive, once the lender accepts your offer, you must close the transaction within 14-21 days. If closing does not occur in that time frame, a fee of $150 per day paid can be assessed to you, the buyer.

    7. The Seller is not likely to make repairs, replacements, or even clean the property.

    In a short sale transaction, the real seller is the lender. If the short sale property has defects and needs repair, the lender may be unwilling to pay for them. If once you're in escrow, you find out through a home inspection that the home needs a new roof or has foundation damage, you will have to pay for these repairs if you want to close. As a buyer, you have the option to cancel the transaction based on the home inspection, but if you want the property, the cost of any repairs falls on you.

Read 7008 times Last modified on Saturday, 13 July 2013 04:56
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