Just a quick reminder to all of you buyers out there trying to get a steal on the next short sale deal in Charleston. A lot of the time, there are wonderful deals (read in: steals) that can be made when purchasing real estate via short sales in Charleston. Most of the buyers I’ve encountered fully understand that a short sale is basically a seller that is behind on mortgage payments. They can be 2 months behind, or 7 or more months behind in their monthly mortgage payments. A short sale is when a seller is trying to get the bank to accept a loss on the property, or for the bank to accept a contract for an amount that is less than what the seller owes on the note. The seller basically owes more than the property is worth, or is in financial trouble and needs to sell quickly- and does not want to go into foreclosure.But enough about the sellers side of things, this blog is about you, the buyer! Like I mentioned, short sales can be short and sweet, but I’ve found that this is not always the case. Better yet, a lot of buyers get burned on short sales. So I am going to list a number of precautionary steps that you can take to help decide if a short sale is for you.
The first thing about a short sale is length of time. Short sales are not typically short! If all you have is time, then this just might be for you. But if you don’t have “all the time in the world”, then you may pass on the short sale. The reason I say this is because more often than not- short sales take longer than the average closing. If you are a first-time homebuyer looking to take advantage of the $8,000 tax credit, then know that this can take up to 3 months or more, and you might get beat out by another buyer’s contract. Yes, that’s right…It may take a few months to close on a house that you want, only to have the bank accept another offer 3 days before your closing- thus leaving you out in the cold. I don’t know if you all got the memo folks, but banks are all about money. They have a bottom line; just like you do- and they are in it for the money. So if you’re looking to take advantage of the $8,000 tax credit- know that your deadline is to close by November 30th, so DON’T MESS AROUND!
Let me explain this a little further…Once you find a short sale “house” that you like, you put in an offer. This goes back and forth between you and the seller a number of times (like any negotiations in a contract). Offer, counter offer, counter offer, and so on. After this plays out and you have a ratified contract (the sellers & buyers agree to the terms in the contract), the listing agent will then pass this along to the bank. Know that all short sale contracts will be “subject to 3rd party approval”. So even if you have a “ratified contract” with the seller, the contract is subject to 3rd party approval, which is the bank. This is how you can lose out 3 days before closing. Sometimes, banks will give the final approval the day of closing. Make sure if you DO involve yourself within a short sale, that you get a letter from the bank stating bank approval of the contract. I’d hate for you to go through the home inspections ($$), appraisals ($$), bank fees ($$), only to get rejected a few days before closing because someone brought the bank more money than you.
Another issue is when the seller has more than one lienholder. If the seller has two loans on the property (like those popular 80/20’s a while back), the seller must get the primary lienholder to accept a loss, and then get the secondary lienholder to also accept a loss. Chances are, the secondary lienholder won’t get much of anything because the primary lienholder wants as much as they can get out of it. It might be tough to get the secondary lienholder to commit to anything. Thus, this may be a cause for things not to work out. So if you’re putting an offer in on a short sale, make sure you find out how many liens are on the property.
One last thing…If you want the real deals, look into foreclosures and REO (bank owned) properties, or normal sellers giving things away. Short sales are for investors that aren’t going to buy on emotion or that don’t mind “not closing” after 3 months of work. Investors will just move on to the next short sale. Just know that sellers right now are being quite flexible on things and you can find a great home, for a great price, at a steal. If you’re not an investor, short sales can be a headache! Posted by Mike Ciucci on
Mike, another good article. I always enjoy reading your blog.
Posted by Myrtle Beach Real Estate on Saturday, July 11th, 2009 at 5:30amExcellent Post! "Short Sales" have become a popular term in today's real estate market.
Posted by Brian @ Land in Columbia on Sunday, January 17th, 2010 at 5:07pmLeave A Comment