Short Sales from a Buyers Perspective, The Good, The Bad and the Ugly
From a buyer’s perspective a short sale can definitely be a buying opportunity, but it should be approached with due diligence.
From a buyer’s perspective, a short sale is a good thing because it means there are some homes for sale that meet my home requirements.
From a buyer’s perspective, a short sale can be a bad thing because it may never close, or at least it may never close under the terms of the offer accepted by the seller.
From a buyer’s perspective, a short sale can be ugly:
· When the bank’s settlement letter comes back and the bank needs more cash, then it’s ugly.
· When the bank has deficiency language in the settlement letter, then it’s ugly.
· When the 1st lien holder offers an insufficient sum to the 2nd, then it’s ugly.
· When the bank won’t pay the $15,000 in past due HOA fees, then it’s ugly.
· When the buyer’s FHA lender requires repairs to close, then it’s ugly.
· When the investor guidelines wont’ allow a short sale at the contracted price, then it’s ugly.
· When the appraisal and BPO come in high, then it’s ugly.
· When there’s hidden MI (Mortgage Insurance), then it’s ugly.
In California, the SSA Short Sale Addendum clearly states that there is no assurance of lender approval and goes on to say that the bank “(ii) may require Seller to forward any other offers received; and (iii) may give consent to other offers.
Advice for short sale buyers:
· Expect the unexpected when you are a short sale buyer.
· Be committed to the home or it’s not worth the wait.
· Know your limitations and set your expectations.
· If there’s a 2nd lien holder, acknowledge that homes with two loans are more challenging to close than homes with one loan.
So what’s a buyer to do? First, work with a seasoned veteran real estate agent who is trained and experienced in buyer representation. Remember: in a short sale situation there are no guarantees this home purchase will ever happen. There are warning signs for short sale pitfalls.