First time home buyers, and buyers to whom “short sale” is a term they have heard but have no real idea of the meaning, would do well to do some homework before recruiting an agent to help you find that short sale “bargain” everyone else seems to be interested in finding.
Doing your homework enables you to better understand the process, which will be helpful to your agent when the two of you are planning strategies. A knowledgeable buyer and an experienced short sale agent can make a formidable team when searching for that special short sale property.
When you are interested in buying a short sale property, you should realize that you are not only dealing with a distressed homeowner, but you are also dealing with a distressed lender whose loan may be going bad.
However, do not get the impression that that you are going to be able to “steal” this property for 50% or 60% below market price, for example. If you have understood what a short sale transaction is all about, then you should also know that the offer you make on the property will be subject to lender (not homeowner) approval.
Lenders can be tough to work with, and there may be multiple offers already being considered. Getting into a bidding war is most always counterproductive. The key to purchasing such a home is to outbid your competitors and still be able to make the purchase at an under market price, which is not an easy task. Otherwise, pull out of the competition and look elsewhere.
The key to a successful negotiation is through your short sale agent specialist. He or she will be able to advise you as to what the true market value of the property really is, so that you do not overbid.
Don’t overlook the lender’s strategy which, in some cases, is to deliberately price a property at an attractive under-market price in order to attract the multiple offers that could result in the property being purchased at market or even somewhat above market price, and as close as possible to the amount owed on the original loan.
Furthermore, when bidding on a short sale, the prospective buyer may have to wait a month or many months for the lender to decide to accept or reject the bid.
In fact, the ultimate decision may be based on the possibility that there is a second mortgage holder involved, and the decision making might get bogged down if the two lenders are unable to agree on an acceptable selling price.
The lender’s broker plays a key role in the decision-making process as well, and will advise the lender of comparable sales in order for the lender to evaluate the acceptance or rejection of an offer.
Ultimately the bank could also decide to abandon a short sale and take the property through foreclosure if that would prove more profitable.
Although short sales are not always the bargains some buyers may hope for, and can be a complex and often frustrating way to purchase a home, as more and more properties continue fall into the distressed category, lender’s anxieties may grow and that could result in a surge of true bargains in short sale properties.
Tony Sena is a Las Vegas Real Estate Broker/Salesperson and Designated Property Manager with North American Realty of Nevada. He currently oversees a team of 10 real estate agents and manages the Property Management Division. He can be reached at 702.376.0088.