The real estate market is quickly racing into a downward spiral. Many homeowners are being faced with higher interest rates, as they move further into their home loans.
These interest rates are forcing more and more homes into foreclosure. With foreclosure comes the chance of a short sale. But, for the home buyer, what is a short sale, and how can they take advantage of it?
A short sale refers to the fact that a home is on the market for a price that is “short” of the entire loan value. This term can be deceiving, especially if the homeowner has taken out a second mortgage or refinanced the property.
The price of the home will be set by the lender and not by the homeowner. The lender has the right to say no to an offer just because they want to.
The lender is never required to accept any offer, even one that is exactly what the home is being advertised for.
Homebuyers will need to keep in mind that short sales are one of the hardest real estate deals to complete.
Depending upon the lending institution, a homeowner that is pre-approved has a loan commitment in hand and is offering the exact price advertised, may either close on the home in days or never get the deal done.
For homeowners who wish to try and take advantage of a short sale, there are a few things to keep on hand in order to make the process as smooth as possible.
The most important asset a homebuyer can have when trying to purchase a short sale home is a great real estate agent, that is versed in short sales.
The real estate agent will be able to guide you through the process of short sales and help with all needed paperwork and forms required by banks.
In order to take advantage of a short sale, the homebuyer will need to be pre-approved for the loan amount. The bank can take or leave any offer you put on the table, they can even counteroffer at a higher price.
Having a pre-approval letter will ensure the bank you have the funding you are proposing, and increase the trust between the two parties.
The hardest asset is patience. A short sale may not be short at all.
If the home is facing foreclosure, rest assured you will be able to continue the short sale process even after the foreclosure has occurred. Patience is the greatest commodity for homebuyers trying to take advantage of a short sale.
Homebuyers need also to remember that short sales are not going to be the deal of the century. The lender will be offering the home at market value, most of the time.
Homeowners will find the best information about the homes worth, by investigating comparable home sales in the area. If the bank is offering the home for 3-5% below comp home values, you can be sure this is the best deal you are going to get.
Short sale homes are not the easiest real estate endeavor to embark upon. When dealing directly with the lender, homebuyers will need the trained guidance of a great real estate agent, a pre-approval letter and a lot of patience.