You will face a challenging situation when you are in a home-buyers market & need to find a house within your price range. You will be seeking a balance between your needs & the money you'll be paying as monthly payments. You might get confused while making the right decision as it is very difficult to choose the perfect home for you, just as your life's major decisions.
If the owner decides to sell the house but the remaining mortgage balance is much greater than the original market price, the most preferable option which the owner can take in this situation is called “short sale”. There are many factors which can trigger short sale for a home-owner. These are unemployment, aggressive borrowing and declining home values, economical & political situation etc. The it is not possible for a owner to sell a short-sale home all by himself, there are other parties involved too who have the rights to take the final decision. Some times the lender & other parties agrees to sell the property to you (new home buyer) at a reduced price (less than current market value).
A short sale is not like a foreclosure where lender takes over the title & selling rights. Many homeowners accepts short-sale just to avoid foreclosure. So, if you are ready to buy a short-sale house from a owner, there are few important things you'll need to follow :
Eligibility for buying a short-sale house:
How can you determine yourself that you are ready or the perfect candidate to purchase a short-sale home? Here goes some qualities which might help :
Be very patient - Buying a short sale house will require approval of all the related parties like the seller and the seller’s lender or lenders (more than one mortgage) before you close. In case of a single mortgage, short-sale approval procedure may take about two months. If there is multiple mortgage with different lenders, the approval process may take 4 to 5 months. However, If Freddie Mac or Fannie Mae owns the mortgage, it will take much less time to get approved.
Stay financially organized – Lenders prefer cash deals instead of loans. But if you can't afford paying upfront cash, make sure to be approved or pre-approved at least for a short-sale property. It is quite significant to express your financial stability. Your offer will get high visibility & interest to the lender if you pay a large amount as down payment.
Be flexible & avoid contingency - Lenders prefer offers with no-contingency. You should be very flexible with closing dates, do not irritate the lender with absurd questions, unfair requests & manipulated informations.
Some more risks which might bother you while buying short-sale homes:
Chances for rejection - Lenders always want to reduce the risks at their level best. If your offer gets too much lower than current market value of the home, there is a chance that your offer will be denied promptly after wasting several months. On the other hand, lender might offer you such an amount that the whole buying process gets elongated.
Bad terms & condition – Some desperate sellers might not get convinced for signing the promissory notes which ensures the payment of the deficit amount. While selling the house, the lenders also can modify any of the terms & conditions mentioned in the contract. In that case, if it shows the disagreement between both parties, the deal might get cancelled from either of the two parties.
No repair or credits at all - The property will be offered to you along with it's current condition. Lenders will not entertain any repair request from you as they have already suffered from loss.
Be serious about buying a short-sale house, here are some experts who can help you :
Professional real estate attorneys – The entire short-sale house buying process is a law oriented process. It includes several law terms & phrases, specialized language for negotiation, etc. A professional attorney can help to increase your chances of getting the contract approved. A knowledgeable attorney makes the short-sale buying process easier for you.
A trustworthy, experienced realtor - Do not take suggestion from a person who doesn't have the knowledge about real estate & short-sales. Consult a few professionals and research about their work to verify their success of closing a deal. Only a qualified real estate agent can show you suitable short-sale homes, help in negotiations, and maintain a clean relationship with the lender.
Title officer - A title officer will help you in initial title search on a short-sale property & to check whether there is any lien attached or not. Multiple lien holders can create problems for your short-sale buying process. So, it is the job for the title officer to ensure that the property is clean.
A short sale can be a chance for a lifetime to you. But generally it is a quite long process, so you will have tackle the matter with patience and flexibility. If you adopt the above given characteristics, and proclaim yourself financially stable, then do not waste time to reach out to a real estate professional to get started today!