Buying A Short Sale, What’s The Benefit?
By purchasing a Short Sale you are helping someone in the community avoid foreclosure. In most cases you are also getting a discount per market value as this is a home the home owner and bank are motivated to sell, giving you buying power. Many Different Types Of Buyers Purchase Short Sales.
What Are The Pros And Cons Of Purchasing A Short Sale?
The short sale process is usually NOT short, it can take 1-2 months to get an approval from the bank. You will most likely be able to purchase the property at below market value, that can be a great benefit and worth waiting around for. The property may be sold as is, the lender may decide not to fix anything needed in order to finance, but there are loans out there that will approve such property.
The seller and lender ARE motivated to sell in order to beat foreclosure, the bank saves money even after the short pay off vs. foreclosing. Your offer is not completely accepted until the bank and/or lien holders have signed off as approved.
The home may be the perfect fit and right price out of all other homes and under market value – you just can’t beat that. With all the waiting sometime the bank comes back and puts you on a deadline.
You are still able to request closing and prepaid costs associated with the purchase.
What Is The Buying Process Of A Short Sale?
As with all buyers – you must be able to provide a pre approval from your lender, or proof of funds showing you have the funds to buy. You will also need earnest money, this is usually 1% of the sales price of the home and due upon an accepted offer. Earnest money goes toward the purchase price of the home, This is showing the seller a promise to buy as long as all needs are met and agreed upon by all parties, your earnest money will be held into title and escrow until the purchase is final. Also be aware of closing costs. Closing costs are separate from earnest money and usually run about 3.5% of the sales amount, when you have a home in mind your lender should be able to give you an estimate of closing and prepaid that will be due at closing – This estimate includes taxes, private mortgage insurance, lender processing, credit reports, any title and escrow settlement fee to record title, and credits to the buyer and/or seller.
Your Agent will be able to help you negotiate these in your offer, although it is always recommended to have some funds available should closing or prepaids change at closing – this occurs due to proration of taxes and rates per day to the closing date. The seller may even decide they will not negotiate the whole amount. Purchasing a short sale is the same as purchasing any other type of property except the waiting period for approval. The first offer will be submitted to the homeowner, once accepted the offer will be submitted to the lender, The lender and /or lien holders may take a while to respond – there is really no set time on the lenders response. Once the seller has accepted your offer, you will receive the sellers property disclosures this will be signed off by you and your agent, the sellers property disclosure contains property information known and unknown by the seller.
Once the offer is accepted by the lender all terms of the offer or counter offer agreed to are set in motion, such as when and where to pay earnest money – this will be paid to the title and escrow company agreed upon in the offer, the inspection period begins – the time frame you gave yourself is the time you have to get the inspection(s) complete and either accept the property, negotiate further or request repairs to be complete. Your closing date is the same as agreed upon – with a short sale usually this will be changed with an addendum due to the time of response from the lender/ lien holders.
Once Accepted Your lender and agent will be putting everything together to meet the closing date. Your lender will most likely request more information from you as time has passed since your first pre approval.
Title will prepare a Preliminary title report, showing you all out standing liens, taxes and any form of easements or rights on the property. This will ensure a clean title report when the property closes and catch anything that the buyer or seller may not have been aware of. This also makes for an insurable title.
Once your lender has all documents in order, your lender will send the documents to title. When received your title and escrow officer will contact the seller and buyer and buyers agent – here the closing documents will be signed by both the seller and the buyer – During this time any closing or prepaid costs are due in full.
Once signed by all Parties to the transaction including the lender/ lien holders the documents will be sent back to your lender to be signed off on to release funds, usually funds are released the following day.
Once funds are released the title and escrow officer records title with the county in which the property was purchased. The title and escrow officer calls all parties to let them know the title has been recorded and the agent is able to release keys to your new property. Congratulations You Are Now A Home Owner !!!!!