8 Things You Must Know Before Investing In Short Sales
This is why short sales processing is so slow.
Top 8 Things Investors Need To Know About Short Sales
1-90 day deed restrictions are common. Every bank has different specifications on their deeds. Some are more restrictive than others. Some have been allowing sales under 90 days, as long as the price doesn’t exceed 125% of the original purchase price.
2-We average about 4-6 months to close. Sometimes it can be longer, and yes, they’ve gone shorter. But typically, it’s about 16-24 weeks after we accept an offer.
3-Cash is not as impressive to a lender. Go ahead with a cash or conventional offer, it won’t matter to the lender. Cash may be king in the investor world, but the short sale process also works with the retail end of the home sale. Regular home buyers are able to use programs such as VA loans or FHA loans if the property is suitable. The bank is looking at their bottom line net number, and as long as they get their net, either one works fine.
4-A long list of repairs can’t hurt, but probably won’t change the appraisal by much. Many of our investors do their own renovations as well. An extensive punch list is sent in with their offer. However, the bank relies on their own 3rd party appraisal and may not take repairs into account, as they aim to capture net profits. Just like used cars, most homes are considered average for overall condition.
5-An agent who knows how to pull the right comps to back up your offer is priceless. As much as we try to make the appraiser’s job easier because we are familiar with the local neighborhoods, pulling current, local area comps and similar condition, is vital in locking down the final number. Banks still seek regular sales comps to justify a short sale price point, so we offer more accurate foreclosure comps to offset this. It is rare, but if there is a large discrepancy in the values, we know how to aggressively pursue the proper price point for the property.
6-A buyer’s agent has zero control over a short sale process because they are not in communication with the seller or the seller’s lender. Their job is to follow up with the listing agent, coordinate with the attorney and mortgage lender, ensure paperwork is signed properly, schedule the property inspection and final walk through. The listing agent needs to have experience with negotiations with the lender or work with a 3rd party negotiator who does. Deals like this must be constantly managed in order to stay on track to a final approval letter.
7-All short sales are required to be listed by a licensed agent and put on the local MLS. If you’ve got a potential lead but need to clear the cloud on title, remove a 2nd mortgage, halt an auction date, or get the property to sell for less than what’s owed on the mortgage, it may qualify for a short sale. Let us know. If we screen the seller through our short sale pre-qualification system, it is a lot more likely to to succeed as a short sale. If the property meets your criteria and we're able to list it as a short sale, then you'll be the first one to put in an offer.
8- No person purchasing the property may be related to the sellers in anyway. It must be an arm’s length transaction. Agents buying the home for themselves will not be able to receive the commission on the buyer side.
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