Short Sale Buying Tips

If you think you want to purchase a short sale property, you will really have to make sure this is the path you want.  Every buyer in the world thinks if they buy a short sale they will be getting a deal.  Just remember, if it seems too cheap, you will be paying one way or another.

There are some tips to consider if you want to purchase a short-sale property:

1.  Work with a Realtor.  This is not  a road you want to go down by yourself.  These sales are unlike any real estate sales you have done in the past.  The bank will be paying the Realtor's commission, so there will be no additional cost to you.

2.  Determine your patience level.  If you get antsy and have no patience, this is not the type sale for you.  Short sales can take 30,60,90 days or even longer.  The bank negotiator may have 100 or 200 packages just like yours.  There is no threatening or coercing these bank employees.  They cannot afford to care.  They are overwhelmed.

3.  Have a pre-approved loan.  The bank won't even take your short sale under submission without verification that you are an approved buyer.  This is not a step to play around with because the bank negotiator won't even look at the file.  You will go to the end of the line and that is not a pleasant place to be.  It is between a black hole and the deep blue sea.

4.  Understand what a short sale is and what it isn't.  Some banks are trying to settle their mortgages.  Surprisingly enough, some banks don't try to settle their loans.  They have other hidden reasons for not settling.  If there is Private Mortgage Insurance involved, it may be more profitable for the bank to foreclose.

5.  Be prepared for an "as is" response from the lender.  In other words, don't expect repairs.  Most lenders are not paying for repairs and just don't care.  They are already losing money on the loan.  They are not willing to throw good money after bad.  That leads us to the next point.

6.  Have a physical inspection.  Do not use your father, your uncle, your aunt, your cousin or anyone else in your family or friend sphere unless they are licensed contractors or do physical inspections on a daily basis.  It there is an issue, and if you want to try and get the bank to fix it, and if you have ignored #5 above, you must have input from a neutral 3rd party.  Family and friends do not count as neutral 3rd parties.  In spite of  #5 above, sometimes a bank will allow a repair.  Just don't count on it.  Make sure you discover any defects prior to purchasing the property.  After the fact is not going to help you.

7.  Can you afford this property and any/all repairs?  Look over your budget.  Are you comfortable with the mortgage payment, taxes, insurance and any needed repairs?   Do not over buy because your finances might under deliver.  Be careful.

8.  Assume nothing.  Do not think a short sale is going to act like any other sale you have experienced.  These sales have a life of their own.  Sometimes there is no rhyme or reason as to why the sale proceeds the way it does.  These sales remind me of a Haley Mills movie I once saw, "The Castaways."  Maurice Chevalier sings a song that says, "Why cry about bad weather, enjoy it.  Each moment is a treasure,enjoy it.  We're traveler's on life's highway enjoy the trip.  Each lovely twist and byway, each bump and dip.  If there's a complication, enjoy it...."  Truer words were never spoken or sung in a song.  A short sale is an adventure.

9.  Don't assume the sale is a done deal.  Be willing to keep looking after your offer is submitted.   The short sale is not done until it is done, and even then there can be issues.  We closed a short sale where everyone signed off, or so we thought.  Escrow was closed.  The buyer was in possession.  The seller was gone, and then one of the mortgage holders decided they hadn't given their written approval to the title company and the escrow company.  It was after-the-fact, but everyone had to jump thru hoops to get the mortgage holder what they wanted.  All ended well, but it showed us these sales are like eating onions.  They can keep repeating.