Short sale, in real estate, means marketing a property lower than the pending mortgage on it. It usually occurs when the property value drops and sellers don’t get money from a certain buyer to liquidate their existing mortgages.
Some buyers engage in short sales to be able to receive a great deal because they genuinely believe that purchasing a short sale can give this opportunity. Thus, when you happen to see a price listed for a specific property, ask your agent first to know if the property is a short sale.
You may want to reconsider making a bid on a pre-foreclosure, short sale property. For a little help, listed below are tips and techniques before you even buy a short sale property.
Get a Real Estate Agent with Short Sale Background
The worst thing that you can do is to hire an agent who has never had an experience with short sale properties. Avoid going through that situation where both of you are completely blind about this field.
With that said, you must hire a knowledgeable agent who can deal with surprises and prevent any problems from occurring. A real estate agent with a considerable amount of expertise and experience in short sales will certainly guide you to quicken your transaction and take care of your interests.
Of course, you do not want to miss out any critical details because of inexperience or learn that your business dealing will not be going to close on time because nobody cared to follow it up. You can hire experienced agents in many real estate firms like Rose And Jones.
Know the Possible Repercussion of Short Sale
Some sellers are very agitated to dish out their respective mortgage payments. However, they do not usually consider the possible repercussions after the sale. Maybe months or years later, they can get a collection letter for the dissimilarity between the amount of the property sold and the pending mortgage.
Without a doubt, laws differ by state, but some states let lenders “chase” the sellers to get that balance after the short sale is complete. That is why it is very important for borrowers to know if the lender settles to forgo the balance or the deficiency left on the mortgage after the sale.
To avoid dire situations like the one mentioned above, make sure to have the short sale through the HAFA or Home Affordable Foreclosure Alternatives program. Those lenders who authorize short sales through this program have to free the borrower from the possible deficiency judgment.
However, it is not a necessity for the lenders to agree with this federal program. They are free to make a short sale from their guidelines and rules decided by the loan investors. With that said, it depends on the lender if he/she will continue the balance against the borrower.
Examine the Public Documents
It is of the utmost importance to do your fact-finding before buying a short sale property. Your hired real estate agent can certainly determine whose name is on the title, in case there is already a foreclosure note registered and the amount of money owed to the lenders. By doing so, you can easily decide how much money to offer.
Preparing the Seller and Property for a Short Sale
For sure, a lender will not likely approve a short sale if the seller is incapable of compensating the difference between the pending loans and sales price and has no equity. As such, sellers must see to it that they can present a financial hardship letter addressed to the lenders.
Get the Right to Run Inspections
In most cases, the lender will not authorize a seller to compensate for common items that an accustomed seller would pay off. These comprise of home insurance system for the buyer, pest and termite inspections. However, buyers will have to buy the property without any restoration.
Thus, it is very crucial that a buyer reserve the right for a home inspection. Buyers deserve the right to a home warranty plan to have a peace of mind and mental freedom about what can potentially malfunction in their new property.
Takeaway
If you see a short sale property that you think is within reach, don’t get too excited. Before you even decide to buy a short sale property, you must know some tips and strategies to avoid any future complications.
As stated above, first you need to hire an experienced short sale agent, then learn the possible consequences after the sale, study the public records, prepare the seller and the property for the short sale. And lastly, you need to have the right to run home inspections.