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Many buyers want to pursue short sale listed homes to get a good deal. When you see a
price listed for a home that you think is way too low for the neighborhood, before you race
to the office to get your offer in, find out if the home is a short sale. You might want to think
twice about making an offer on a pre-foreclosure or short sale home. It’s not as simple as
you may have been lead to believe, and the time it takes to get to the closing can be as little
as 15 days or up to several months.
Surprisingly, in some cases the seller may not be in default on his mortgage (stopped
making mortgage payments). Some lenders will consider a short sale |
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if the seller is current
but the value has fallen. The seller may have over-encumbered (owes more than the home is
worth) so a discounted price might bring the price in line with market value, not necessarily
below it. |
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Do your research before making an offer to purchase. Your agent can find out who holds
title to the property, whether a foreclosure notice has been filed and how much is owed to the lender(s). This is important because it will help you to
determine how much to offer. Your agent can also provide detailed sales information on the neighborhood to ensure the property is a good value. |
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In some cases there could be two or more loans, which can be a problem. The first mortgage lender’s position is protected by any secondary lenders,
unless the secondary lender(s) do not want to foreclose. If a seller owes $200,000 on the first and $50,000 on the second, offering $200,000 leaves
nothing for the second. The first will need to give something to the secondary lender(s) to get their cooperation. |
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If the listing agent has never handled a short sale, getting through the process to the closing table can be a nightmare. It could be even worse if your own
agent has no experience in that arena. An experienced short sale agent will smooth out many of the bumps in your transaction while protecting your
interests. You don’t want to miss any important details due to inexperience or find out your transaction is not going to close because proper follow-up
was not done with all the parties involved.. |
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| A lender is not going to agree to a short sale unless the seller has no equity and is unable to repay the difference between your sales price and the
existing loans. Sellers need to provide a hardship letter to the lender.. |
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| Be forewarned... a seller may ask that the buyer slip the seller $1,000 to be given the right to purchase the seller’s property. Just say no! This is fraud.
Do not be lured by sellers who suggest this practice. In a short sale, the seller receives no money because the lender is losing money. All monies
changing hands should be fully disclosed on the closing documents. |
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Once the seller has accepted your offer, it is sent to the lender for approval. You will not have a deal until the lender agrees to the terms. Also, make sure
the lender receives a copy of your earnest money deposit check. And, be aware that the lender could ask you to increase it. The lender will also want to
see that you have your financing in place and that you are preapproved. Send a preapproval letter with your offer. It will help if your agent sends a list of
comparable sales that support the price you are offering to pay for the home. |
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Make your offer contingent upon the lender’s acceptance. By giving the lender a time frame in which to respond, you will be free to cancel if they take
an excessive amount of time. If the lender has no pressure to make a decision, the paperwork will just sit without a response. |
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Most should be able to make a decision within two to three weeks, providing the offer reached an individual in decision-making capacity. The agent
submitting the offer should get the name and phone number for the appropriate contact at the lender. Note that many larger lenders have huge “Loss
Mitigation Departments” where it’s almost impossible to talk to the same person.. |
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Regardless of the commission the seller has agreed to pay, the lender is actually the entity paying the commission. The reason is the seller is not
receiving any money with which to pay a commission. Since the lender is losing money, the lender may try to negotiate the commission directly with
the listing broker, who will then share the commission with your agent. |
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If you have signed a buyer’s broker agreement with your agent, ask if the agent will waive the difference due or you might have to pay it out of your
pocket. Some brokers feel it is unfair to penalize the agent, but the lender often has the upper hand here. |
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Some
lenders may not pay for customary items that a seller would
pay. These may include home protection plans for the buyer,
buyer’s closing costs, buyer credits of any kind and
pest/termite inspections. A buyer may also be asked to purchase
the property “as is,” which means no repairs. |
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It is extremely important that a buyer obtain a home inspection and pay for other types of inspections such as pest, roof, sewers, septic tanks, chimney
or fireplace inspections. Do not waive your right to obtain these inspections and make your offer contingent on approving them. |
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One last note. Be aware that like bank owned properties and relocation properties, short sale lenders look at not only the sale price and terms but also at
the strength of the purchaser. Often, in multiple offer situations the lender will accept the offer of a cash or high down payment conventional buyer over
a higher offer where the buyer is applying for low or no downpayment financing. |
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Still interested in pursuing Short Sale properties? Call our buyer hotline at 614-657-0023 or toll free at 888-868-0381 to speak with a Gregor
Team Buyer Specialist. You can also complete and submit the form below and a specialist will follow up with you. |
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