RE/MAX Real Estate Guide and FAQ - Questions and Answers for Real Estate Buyers
RE/MAX Valley Real Estate, Boardman, Ohio

Real Estate Guide

Buying Your Home

 

RE/MAX Valley Real Estate

RE/MAX
Valley  Real Estate
1040 South Commons Place, #102
Boardman. Ohio
(330) 629-9200

RE/MAX Real Estate FAQ - Buying Your Home, Working With A Real Estate Agent

Buying Your Home - Questions and Answers
'Short Sales'

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Should I consider buying short sale properties?
If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. Although a short sale can be a great below market buying opportunity, it holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You're a good candidate for a short-sale purchase if:

  • You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
  • Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you're pre-approved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
  • You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

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What are the problems buying short sale properties?
Some of the risks faced by buyers of short-sale properties include:
  • Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
  • Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
  • No repairs or repair credits. You will most likely be asked to take the property "as is." Lenders are already taking a loss on the property and usually will not agree to requests for repair credits.

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How do get financing for a short sale?
Most lenders will finance a short sale the same as any other. It's important, however, that your lender and you know that this process may take considerably longer than a normal transaction, so you will want to 'lock-in' an interest rate, if you feel rates may be on he rise.

It's also very helpful for you lender to pre-approve you subject to appraisal rather then the typical pre-qualification the lender like to give you before you actually make formal application. This way the seller's lender knows that you are truly qualified to purchase the home.

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Where can you find short sales?
A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as "lender approval required.")

RE/MAX Associates are among the most versed in the industry in short sales and foreclosures – of all the Certified Distressed Property Experts (CDPE) and Certified Short Sale and Foreclosure Resource (SFR) agents in the U.S., 58% are RE/MAX agents.

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Do you need to buy a short sale through a realty agent?
If you're serious about purchasing a short-sale property, it's important for you to have expert assistance. Here are some people you want to work with:
  • A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they've represented in a short sale and, of those, how many have successfully closed.
    See also>>  Designation (SFR) - Short Sale and Foreclosure Resource
  •  Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who's knowledgeable about the short-sale process, working in concert with your REALTOR, will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
  • Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

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