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Buying a Short Sale

“What is a short sale?” Well, we’re glad you asked. First off, it is NOT a foreclosure. A short sale is different from a foreclosure in that the owner is still controlling the sale, not the bank. The seller is putting their home up for less than they owe on their mortgage. The process can take awhile, but it can be an asset both to buyers and sellers in certain situations. Real bargains can be found in short sales for buyers, and sellers can minimize their losses on a property without foreclosing. We are committed to helping both buyers and sellers with the short sale process. We have experience with short sales, which is extremely important in getting through it all smoothly. We also know and can recommend real estate attorneys and title experts who are knowledgeable about short sales, another key component of the process. Our goal is to help buyers achieve realistic and affordable offers and sellers not to be short-changed by low offers.

The biggest risk with purchasing a short sale is the time that it takes to go to settlement (if it settles at all). The time that it takes to close a short sale can easily exceed 90 days from the time the seller accepts your offer. Buyers that are on a time crunch may not be able to purchase a short sale because of this. If you are in a time crunch then you should consider a regular sale or perhaps a foreclosure. A foreclosure sale can also have delays which are usually related to title issues.

A successful purchase of a short sale depends a lot on how good the listing agent’s communication is with the seller’s lender(s) and how forthcoming the seller is with their financial information. The seller and listing agent need to provide a lot of information to the bank so that the bank can verify that the seller can no longer afford to pay for his/her home. A seller that is attempting to complete a short sale needs to submit documents like a hardship letter, W2's, tax returns, and bank statements. Short sales where the seller has multiple loans can be more challenging than if a home has only one single loan; each bank has their own policies and requires their own documentation. If the seller has a second loan on the property, it can be challenging to negotiate with that second lien holder. The seller’s lender will complete their due diligence to make sure that the offer amount you made is an accurate one for the market value of the home. To do this they often order a "broker price opinion," also known as a BPO. Realistically speaking, most short sales end up settling for very close to market value, and typically require a very patient buyer.

If you’d like more information on short sales, please contact us at nate@rcrdc.com or ben@rcrdc.com.

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