Short Sales information for buyers
Prepared by John Lippincott
A short sale in real estate means that the lender is accepting less than the total amount owed to release an existing mortgage. Not all lenders accept a short sale nor do all sellers or properties qualify for a short sale.
It is very important to work with a Realtor such as myself who has experience in doing short sales. I am a CDPE, Certified Distressed Property Expert and know what is needed to complete the short sale process. You must be patient, diligent, organized, and persistent. But when all parties collaborate, it can be beneficial to all involved.
Lenders have varying requirements and will ask the seller/buyer to submit a wide variety of documentation. If you are considering the purchase of a short sale, here are some suggestions:
Check Public Records:
Have your Realtor find out who is on the Deed, whether a foreclosure notice has been filed, and how much is owed to the lender. If there are two loans, you could have a problem. The first mortgage will need to give something to the second mortgage to gain its cooperation.
Short Sale Experience:
Hire a Realtor or a firm that is experienced in the short sale process. Experience in the short sale arena will help you expedite your transaction and protect your interests. I suggest you obtain legal advice from a competent real estate lawyer and contact an accountant to discuss short sale tax ramifications.
Prepare the Seller for the Lender Demands:
See short sale under Seller Resources.
Purchase Offer to Lender:
When a seller agrees on your offer, the lender will want a copy of the offer and a copy of your listing agreement. It is very important that the offer has no financing contingencies and all the required addendums. Make the best and strongest offer possible. Also, send the lender a letter of commitment that your loan is approved and a letter that your earnest money deposit has cleared.
Give a Deadline:
Make an offer contingent upon the lender’s acceptance. Give the lender a reasonable time frame in which to respond. If the lender does not respond within the time frame, you will be free to cancel.
Right to Inspect:
Always conduct appropriate inspections on a property. Generally, the lender will not pay for customary items that a seller would pay. The buyer will be asked by the lender to purchase the property “AS IS”, which means no repairs. Do not waive your right to these inspections and make your offer contingent on approving them.
Package:
It is very important to send a complete package with seller/buyer information to the lender. Missing information will delay the process. Remember, there are multi-levels of approvals and conditions are usually required. Keep in mind that lenders are overwhelmed and review thousands of files. They will only consider packages that are well put together and are likely to close.
John Lippincott is a REALTOR® with
A Licensed Real Estate Brokerage.
