By Michael Humphries - Compass Roads Realty, Inc. |
8 Steps to a Successful Short Sale Purchase- Part 2
Here we will conclude the process of successfully buying a short sale with the final four steps. If you missed Part 1, you can find it here.
5. Under Priced Listings: Don’t get trapped in the under priced listing dilemma. If the price looks too good to be true, it is. Remember, it’s very possible the bank isn’t even aware that the property is listed and hasn’t had a chance to review or approve the current list price. The initial list price is determined by the seller and listing agent, neither of which have the actual authority to approve the final sales price.
Listing a short sale below market value– often way below– is an old tactic to find out where the bank is in terms of price acceptance. Many enchanted buyers have fallen head-first into this all too common predicament. It could take months to learn that your offer was rejected or beat out by another buyer. In the mean time you could be at risk to rising home prices and higher interest rates.
6. Valuation: Once you’ve decided on a home to make an offer on have your realtor run a Competitive Market Analysis (CMA) to determine market value. This valuation should be the baseline in establishing your price and will be used to substantiate your offer to the bank.
The CMA should consist of three to five comparable homes that have sold within the past 3-6 months, usually within a 1 mile radius and three or more similar homes currently listed.
7. Offer Price: Your offer should be based on fair market value– not asking price – if you want to be considered by the bank. Deep discounts on short sales are fading quickly. Banks expect, and are holding out for fair market value.
List price on a short sale has little to no influence on what the bank will actually accept in terms of your offer and should not be weighted in determining your price.
Although negotiations and real estate sales historically go hand and hand, many prospective buyers are passing on the attempt to get the best deal possible. After being beat out by other purchasers on previous properties, schooled buyers are basing their offer on a careful valuation analysis and coming in with their best price from the onset.
Multiple offers on the same house are common so it usually pays to make yours your highest and best going in.
8. Offer Approval: Once the offer is accepted and signed by the seller, the offer is submitted to the bank. The seller’s acceptance does not have any authority or control on whether or not the bank will accept your offer. The bank is the deciding factor for approval.
At this juncture the bank will order a BPO (Brokers Price Opinion) from an independent broker to determine the value of the property. Based on the results of the BPO the bank will accept, reject or counter your offer.
Keep in mind - The BPO will be based on the same criteria as your realtor’s CMA. Hence, fair market value estimates should be very similar for both valuations which will put you and the bank on the same playing field.
Once you have an accepted offer in your hands you can continue with standard procedure; home inspections, title search, finalization of mortgage, etc. The actual closing of a short sale is similar to a traditional sale with exception that the seller rarely, if ever, attends the closing.
Despite the challenges, any added inventory– even from short sales – will help balance the historical lack of homes for sale across the country.
For a FREE list of short sales in Miami-Dade or Broward County;
Email “FREE SHORT SALE LIST” to: compassroads@compassroads.com. Include a list of Zip Codes or City Names of interest.
Visit us at: http://www.compassroadsrealty.com/default.html
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