If you are entering the housing market, you will undoubtedly be looking at short sales. Hopefully you are working with an agent that knows the process enough to be able to effectively educate you, the buyer, on how the process will work- beyond the basic definition of a short sale. What I am finding unfortunately as a listing agent is an overwhelming contingent of agents who do not know what they are doing which results in frustrated buyers and cancelled contracts. If you are buying a house that is a short sale- here are a few things to keep in mind.
1. Ask your agent if they have ever listed or sold a short sale
Why is this important? Short sales are like snowflakes. No two are the same. Learning about them from a seminar or a book pales in comparison to actual real life experience. There are a litany of pitfalls that can occur, so having someone experienced on your side can help get the transaction closed. Do not be afraid to prequalify the listing agent, either. Many, many agents are extremely successful in closing short sale transactions and have teams that help them do so. Many are also not so experienced, so knowing who is working the other side of the deal can offer a level of comfort as you embark on the transaction.
2. Know what you are getting yourself into
It is often joked that short sales should be called long sales because they can take so long. I recently had one take me NINE MONTHS to close. However on the other hand I have had some close in 30 days. If you know you have to move in 60 days, you may not want to be looking at short sales at all. Do not be surprised when 4 weeks have gone by without an approval from the bank on your offer. It does not mean (usually) the listing agent is not doing their job- it just means that you are number 40,000 in a line of 60,000 offers waiting for approval.
3. Know what questions to ask
Ask your agent which bank is handling the short sale and how accommodating they are (generally), if there is a first and a second, and if the seller/agent has already initiated the process with the bank. All of these factors can contribute to a fast (or slow) transaction.
4. It does not matter how good your offer is, the process is still the same
I have been hearing a lot lately from buyers “well I wrote a cash offer, why don’t they just stamp it approved and sell me the house and not make me wait”. The quick answer- they don’t care how you are paying for the house. They still have to justify to themselves and the primary investor (the owner of the loan) that it is worth them forgiving sometimes upwards of $100,000 in debt for the seller. This process includes delving deeply into the financials of the seller- paystubs, bank statements, tax returns, letters of explanation, etc. While simultaneously determining the value of the property. The bank is just as much looking at the seller and why they are doing a short sale as they are what you have offered for the house.
5. Do not ask to contact the seller‘s lender yourself, no matter how frustrated you are
There are strict privacy laws and policies in place when it comes to short sales. As a listing agent on a short sale we are granted special permission by the seller to speak with their lender regarding the short sale. Along with this we are often privy to information why they are doing a short sale in addition to their financial records. Many buyers think they can “move the process along” by calling the bank themselves and doing what they think others cannot get done. While their heart is in the right place, it is just not going to happen. Even the buyer’s agent is significantly out of the loop when it comes to these issues. They cannot communicate with the short sale lender either and have very little control over what transpires between the listing agent, the seller and the short sale lender.
The bottom line- the point I cannot emphasize enough- is to be patient and know what you are getting yourself into. Short sales are not for everyone, so taking your situation into account can save you lots of time and frustration. If you have more specific questions about buying or selling a short sale in the Modesto, Stanislaus or San Joaquin County areas, please feel free to contact me.
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