How to buy a short sale

February 8, 2009 · Print This Article

Buying a short sale in Putnam and Westchester County

In today’s real estate market it is a great time to buy a short sale. During a short sale, the owners of the home are selling their home for less than what they owe the bank. The asking price on short sales can be anywhere from 10% – 50% less than what the sellers owe on the mortgage. Read more about Short Sales.
The good thing about short sales is of course the price. Most short sale listings are priced at or under market value. The one thing to keep in mind when considering a short sale is that they typically sell for at asking price or only a little bit under asking. The reason is because the Realtor who listed the property did a market evaluation of the home and listed it for what the “market” says it is worth..or hopefully they did if they know how to do a short sale. The Realtor does not have to deal with seller objection to price compared to a house that is worth $400,000 but the seller wants to ask $450,000 or $475,000. So when you see a short sale, assume that price is a considerable discount compared to other properties on the market.

Bidding on a short sale:

Here comes the tricky part about short sales. Most banks do not hear “offers”, they are not in the business to keep calling agents back with counter offers, if a buyer wants to put an “offer” on a short sale typically you go right to contract on the home. The “offer” is presented to the agent who presents it to the seller and if it is a strong offer, under advisement from the agent the seller will accept the offer. The same holds true if the offer is low and the agent and seller feel it is a “low ball” offer, they will turn it down and it will never reach the bank who has the final say on the offer.
Once the offer is “accepted” by the seller, it then has to be submitted to the bank for approval. At this point you would put go to contract, sign the contract and put your deposit down, still not knowing if the bank accepted (approved) your “offer”.
The bank could take from 30-120 days to respond and if the bank feels the offer is too low they may take even longer to respond. Banks will not waste time responding to a low offer and will get back to the agent when they feel like it and that could take months. So a strong offer (at or very close to asking price) on a short sale is the 1st step to increase your chances of the bank approving the sale.
A lot of buyers think they can just throw out a low bid which is not the case and even if a “low” bid was accepted by the seller the bank still has an appraisal done and then they compare your offer to their appraisal and if it is too low, the deal is dead. So short sales are even harder to negotiate down on price than “normal’ listings, but keep in mind short sales are typically priced aggressively.

Bank approval of a short sale

If you have not heard back from the agent with an answer to your offer/contract in 2-3 weeks from the time the agent submitted your contract to the bank for approval, assume that the bank has not even considered your offer because it was too low and you will need to come up with a much higher offer. If the bank does accept the offer, be prepared to close in 30 days of acceptance or less or the bank will not approve the sale.
The last short sale I closed on had an asking price of $360,000 and my clients put in a bid of $350,000 and the bank approved it, and the seller owed the bank $675,000! Also keep in mind the agent must be skilled at doing short sales and know the correct info to present to the bank or the deal will never be accepted by the bank. I am a Certified Distressed Property Expert (CDPE) and have the skills and knowledge to handle short sales of any nature. There are only 1,000 CDPE’s in the US so if you can try to locate a CDPE in your area to help you with buying and more importantly if you are a homeowner, selling your home in a short sale.
If you have missed payments on your mortgage or will be soon and are facing foreclosure read my Foreclosure Prevention page to learn about alternatives to foreclosure and saving your credit.

Useful link:

View all Putnam Westchester Short Sale listings



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