Frankly, Short-Sales are one of the best deals in the marketplace. These homes sell for 5% to 10% BELOW bank owned homes; which helps to make them the best deals on the market. If you are not paying cash and you are doing more of a typical “normal” financing, then you are going to get a better deal on a short sale because a lot of the bank owned homes are going for cash.
Only make an offer on a short sale when you are certain that the agent who is selling the home and your agent as a buyer both know the process involved in short sales. Otherwise, you are going to be stuck in the process for 6 months or more. If your agent understands how the short sale works and what’s needed to complete the entire process, it can be as short as 60 days for you to complete a short sale purchase.
So what are the key steps to getting into a short sale?
Key Step 1 – Do you have the time? Short sales take longer, plain and simple. Short Sales will take 60-90 days. They should never take more than 120 days in a normal situation. This is, once again, where your agent knowing what they are doing and understanding the entire process of a short sale is important. Now keep in mind not every situation is “normal”; about 70% of situations are “normal.” You also have to also keep in mind that short sales are up from 8% in 2010 to 28% in 2011. That means that short sales are definitely going a lot faster, but you still have to make sure that you have a little bit of time.
Here’s an example of what happens with a short sale; a home that sold 3 years ago for $727,000 sold in a short sale for $275,000. That same home, if it were bank owned, would have sold for about $350,000. So short sales are definitely the best deal out there; but you have to make sure you have the time that it’s going to take to do the process and do it right. So why do they banks do this? Once again, a bird in the hand is worth two in the bush. They want their money and they want it as fast as possible.
Key Step 2 – Work with realtors that KNOW short sales. Be blunt; ask them right up front to show you their track record with Short Sales. Tell them to give you proof that they know short sales. A good Realtor makes the process easy and simple. As a buyer, you’re not paying for the fees, the bank is, so you want to make sure you get a realtor that is good and is going to work for you. The listing agent does 99% of the work, so make sure they have experience. Ask your realtor to search the MLS and see, has the listing agent closed the short sales in the proper amount of time? Ask about what the listing agent’s process is to handle short sales. Do they have a system and a process that they go through to get the short sales through?
Key Step 3 – Be open minded to a counter-offer from the bank. Most of the time a bank will make a counter-offer. Be willing to consider it. The banks are willing to work with you, they’re just NOT willing to give the home away. They go off the BPO (Broker Price Opinion), so that is why it’s so important for your Realtor and the listing realtor to be at that meeting. Again, your realtor should know and understand this process and the listing realtor definitely needs to know.
So why do banks do short sales? Frankly, banks make more money on a short sale than they do on a foreclosure. They make 10%-13% more money on a short sale. The home stays in better shape when they’re making a short sale because the owner lives in it until the closing. There are no added costs of maintenance and upkeep for the bank if the owner remains in the home. It’s a more solid deal for the bank than allowing the home to go into foreclosure. If they can get it done in a short sale they’re better off financially.
It’s all about the money. That is why your offer needs to be a fair offer and not 40% to 60% below the market value. Have your realtor run a market analysis for you before you make the offer so you have something to back you up. So if you want to make an offer at 40-60% below the market value, then be prepared to wait 12-20 months for you to get to a final deal. It comes down to being realistic.
So why am I offering this information on short sales free of charge to you? Honestly? I want to make sure that YOU get a good and fair deal, no matter who you work with as your Realtor. I know that if I get this information out into the marketplace then everybody wins! Knowledge is power. Don’t get me wrong, I make a living by selling homes and we would love to help you with buying a short sale. I am knowledgeable and I have that track record to prove it. I love what I do and selling homes is my passion but it also is what pays my bills. If I can help you make a short sale please give us a call or drop us an email. Most of all, I want to make sure you understand what you need to do in order to buy a short sale and understand what you want to look for in a Realtor. I can definitely offer our services and be the realtor that makes your Short Sale run smoothly and happen as fast as possible.