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8 Steps to a Successful Short Sale Purchase
In this two part post I will layout eight steps to follow that will walk you through a successful short sale purchase from search to closing.
Short sales are gaining market share again and are expected to make up nearly 35% of our inventory during the next 12 months. According to RealtyTrac, who charts real estate activity across the country, completed short sales are expected to exceed the 2012 number, which will likely be around 1 million for 2013. Forty percent more than the 600,000 foreclosures expected this year.
So like it or not if you’re in the market to buy a home this year you are going to be very limited in an already limited supply of inventory unless you consider short sales in your search.
A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property. This type of sale requires a third party approval of price, terms and whether or not the seller is eligible to short sale their property. A bank, lending institution or mortgage servicing company plays the third party role.
It has taken the industry a long time to adapt to the short sale complexities. These waters were unchartered prior to the financial crisis of 2007-2008.
It’s like the “Ten Thousand Hour Rule”– the idea that it takes 10,000 hours of practice to master any skill– that Malcom Gladwell writes about in his book Outliers. We’ve certainly put in the hours and have finally subjugated the madness and mayhem associated with this type of sale. Or, at the least, we’re able to keep it to a minimum.
Fannie Mae and Freddie Mac have recently implemented new procedures to help expedite the process that it takes to complete a short sale– these transactions can take up to three times longer to close than a traditional sale and often never make it to the closing table. The new changes are proving effective so far in reducing completion times and are expected to increase closing ratios significantly.
If you play your cards right, you can look forward to a more practical 90 day timeframe. And if you learn how to navigate through the red-tape associated with a short sale, you can greatly increase the odds of successfully completing your purchase.
Here are four of the eight steps you can follow to minimize the bureaucracy and maximize your Success Story.
1. Find a Realtor: Find a realtor that has hands on experience working with short sales. This is the most important step– period. This type of real estate deal really requires the help of an experienced agent or attorney.
Your realtor should have at least three completed short sale transactions under the belt to qualify as “experienced”. The difference will make or break your deal.
2. Mortgage Prequalification: If you plan on financing your new home you will need a Prequalification Letter from a reputable mortgage company, bank or credit union. The seller’s bank won’t even look at an offer that contains a financial contingency without a prequalification letter attached. Not having these credentials upfront will cause pointless delays submitting your offer.
The majority of lenders will provide a letter at no cost and it only takes a 10 minute phone conversation or a quick online application to complete.
3. Short Sale Search: In addition to traditional listings, ask your realtor to include the short sales in your search criteria. A lot of agents have gotten into the habit of excluding them. There are two types of short sale listings: Approved and Unapproved.
• Approved - simply means that the seller has qualified for and has received approval from their bank to short sale the property. In some cases the bank has approved the list price.
Approved short sales will have a higher yield in terms of potential, especially those with list price approvals. These listings should be considered first before betting on the unapproved– wildcard listings. Although price approvals are subject to change, particularly in markets experiencing rapid price appreciation, these listings are far better to work with than the unapproved deals.
• Unapproved - most short sales are listed as unapproved when they first go on the market. This status means that the seller hasn’t received the banks approval on price, terms or seller eligibility and in some instances, all of the above. In most cases the bank is not even aware that the property is on the market.
Unapproved listings should be left to the specialist, the few and far between agents that have been successfully working short sales for 3 plus years. They have developed ways to quickly indentify whether or not an unapproved short sale listing has a breathing chance for approval.
4. Listing Alert Notifications: Ask your realtor to set you up on an automatic listing alert system that will email you new listings as they hit the market. This will put you in-front of the market and give you an advantage over your buyer competition.
In Part 2, I will outline how to formulate an offer price that will get the banks attention, the valuation process and how to avoid the most common short sale pitfall.
Watch the blog next week for Part 2 – 8 Steps to a Successful Short Sale Purchase
Many partners including the U.S. Department of the Treasury, Fannie Mae, HOPE NOW, HUD, and NeighborWorks America will host "Help for Homeowners" Community Events on Tuesday, March 19, 2013 at the Paradise Event Center - Las Vegas Hotel & Casino.
For a FREE list of short sales in Miami-Dade or Broward County;
Email “FREE SHORT SALE LIST” to: firstname.lastname@example.org. Include a list of Zip Codes or City Names of interest.
Visit us at: http://www.compassroadsrealty.com/default.html