If you’re thinking about buying a home now is the time, there are lots of great deals out there and some of the best are found in the pre-foreclosure market and are what are known as short sales. A short sale is a sale in which the lender agrees to allow a buyer purchase the home for less than the mortgage balance while the home is in pre-foreclosure. The pre-foreclosure stage — the period from when a Notice of Default or Lis Pendens (publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property) has been issued until the time the lender puts the property up for an auction — can last several months, so buying during this time requires a lot of patience and persistence. It typically offers the best bargains, but it’s also the most difficult stage to purchase a distressed home. Understand that the owner still has a chance to stop the foreclosure process by paying off what is owed, OR by selling the property and convincing the bank to accept a short sale and a offer that is less than the amount the owner’s owe on the home. Here is how to go about buying a short sale and negotiating the best price possible.
The critical success factor in these transactions is having an agent who specializes in these types of sales and knows what they’re doing. Thus the first step in buying a pre-foreclosure or short sale property is to find a Realtor who specializes in these types of sales. While short sales have been a viable strategy for years, many agents never availed themselves of the educational opportunities to ensure that they were well versed in the techniques for negotiating a successful short sale. Subsequently there are a lot of agents running around the Columbus Ohio Real Estate market calling themselves short sale experts who lack the expertise and experience to support these claims.
So how do you go about locating one of these specialist? Agents who specialize in these types of sales are easy to identify, as they are those who most frequently take these types of listings. If you™re interested in purchasing a short sale here in Columbus you™ll be happy to know that we are the local industry leader and the premier short sale specialty group in town and thus we™d invite you to give us a call. If you™re looking outside of the Columbus market and would like to locate a specialist you™ll want to search such websites as Realtor.com, Craigslist, and/or Trulia.com and identify those agents with the most short sale listings. Or you may send us an email, or give us a call and we can direct you to a local specialist.
Agents who specialize in these types of sale will not only have an in-depth knowledge of the short sale process and the keys to influencing the banks valuation of the property, but they will also have relationships with those individuals at the banks who negotiate these sales and thus a distinct advantage that will help you in achieving your objective of getting the best deal possible on your next home.
Once you™ve identified a specialist, you™ll then want to establish your search criteria including what it is you’re looking for in a home, which communities or subdivisions you’re interested in considering, and how much you’d like to spend. Be sure to prioritize your criteria specifying your wants as well as your needs, and to express these as clearly as possible as this will help your Realtor to keep your search focused and efficient. Using this criteria your Realtor will then put together an inventory of short sale properties including those currently available and in most instance a few they’re working at getting approved to be sold short.
Make an offer! Here’s where it gets tricky and this is where your agent’s, as well as the listing agent’s experience will be revealed. We can’t go into great detail with regard to the process we employ however, once the homeowner makes the request to sell their home as a short sale the bank will ordered a BPO, or Broker Price Opinion. The BPO is an appraisal of the home’s value and this is a critical phase of the process and one most Realtors neglect. But here’s how the process works, and in this instance we’ll consider a property the owners originally purchased for $350,000 and now need to sell for whatever reason. Now the owners and their Realtor may know the BPO value of the property (let’s say $300,000) and what the bank is willing to take for the property but they are not obligated to tell you and in most instances won’t. The owner’s lending bank will be the deciding factor in whether or not your offer will be accepted and this approval process can anywhere from a couple of days to 60 days or more. The listing agent will usually be able to provide some indication as to the length of time that will be required.
Just as is the case with the typical home sale, the bank can do one of three things once it’s received your offer, they can; accept, counter, or reject your offer. The difference here is the amount of time it will take for them to do so and while this time will vary on average it will take 15 to 30 days for the bank to respond. If your offer is rejected, you can make another higher offer so long as there weren’t multiple offers and another offer has not already been accepted. If the bank counters which they will typically do so long as multiple offers were not received, you may then accept the banks offer or counter them back.
Buyers are encouraged to remember that homes are appraising for MUCH LESS than what most owners paid for their homes and in most instances the banks are willing to accept offers that will net them approximately 80% of the BPO Value (note* unpaid property taxes, closing costs, and other expenses will all be factored into this value). So in our example the bank should be willing to consider an offer of approximately $240K not taking into account the existence of any unpaid taxes, and other expenses.
For more information on purchasing a short sale, or for a list of homes currently offered via short sale please email us your request or call us at 614.332.6984.
If you’re homeowner who’s having trouble making your mortgage payment and are interested in exploring your options including the listing of your home as a short sale, please click here before giving us a call.