Buying a Short Sale Property in West Michigan

House and Keys in Female HandsPurchasing a new home is one of the most exciting experiences an individual or family can have.  If you’ve been out of the real estate market for some time, you may be unaware of some dramatic changes in the real estate market landscape. In today’s market, there are some unique situations which home buyers should be aware of as they prepare to consider the purchase of a new home.

HOW THINGS HAVE CHANGED…

Almost five years ago, one of my blogs featured the quote below:

However, home buyers looking for a home to purchase will also quickly become aware of a notation which currently accompanies almost 65% of the homes listed for sale in November 2008 through the Grand Rapids Multiple Listing Service.  This notation which is accessible to the real estate agent on the listing card, will contain an advisory warning indicating that interested parties should be aware of the fact that the sale of the listed home will necessiate a ‘Short Sale’.

SHORT SALES IN BRIEF…

If you’re a brand new home buyer or recently re-entering the market, this notation may prove perplexing and you may wonder…What is a Short Sale?Well, in short (pun intended)…A Short Sale notation on a listing card is an indication that the home is priced below the mortgage balance owed on the home. (after costs associated with the home sale are paid) What may not be readily apparent to you is the fact that the term ‘SHORT Sale’ does NOT necessarily provide an accurate reflection of the duration of this particular type of transaction.

WHAT DOES THIS MEANS FOR YOU…

Well, it depends.

On the most basic level, this means that in order to become the new owner of this home, you will have to complete a successful negotiation with the owner (s) of the mortgage note to purchase the home to allow the ownership to be transferred to you for less than the current owner owes.  This adds several  additional steps and required signatures to the offer acceptance process which will now include:  the home owner who signed the listing agreement, the lender (s) and in some cases third party investors.

FOR STARTERS…

But for starters, it means that you should be prepared to be very patient and persistent if you truly want this home.  Short Sales are arguably among the most difficult negotiations to complete.  It is not unusual for real estate agents to negotiate for months to bring these transactions to closure.  As housing inventory levels have declined significantly within the past couple of years, some banks have become even more recalcitrant about negotiating a Short Sale in good faith.  Sometimes doing so at the cost of eventually losing the home to a Foreclosure and racking up significant costs in repairing the property, not to mention the fact that payments on the home may not have been made for a long time.

Being prepared for the long haul will save you the angst of increased blood pressure, stress and unnecessary temper tantrums. It will also be deeply appreciated by your hard working real estate agent who will probably accrue more stress than a commission will adequately compensate for.

BASIC STEPS…

Buying a home which requires the negotiation of a Short Sale will also add some additional steps to the home purchasing process.  Be prepared to wait while the bank (s) review the home owners paperwork to determine if they qualify for a Short Sale.  You can also anticipate that a Broker Price Opinion aka Appraisal may be ordered to determine if the bank wants to entertain your offer as one reflective of the current market conditions.  The primary Lender is now required to respond to your initial inquiry within 30 days which should technically shorten the process, but sometimes does not.

Offer submissions for Short Sales may languish on an Asset Managers desk while they sift through hundreds of files which have landed there before yours or wait to see if a better competing offer comes through.  Be persistent.  If you’ve done your homework and received some professional consultation from your real estate expert, you should be aware of the Value of your purchase.  A Short Sale negotiation done correctly can earn you your dream home with a significant amount of equity attached…no small feat in today’s market.

BE PREPARED…

Now, this may seem absurd but you must understand one very important thing; just because the owner of the mortgage may choose to create a long drawn out process does NOT mean that you as a potential buyer will be afforded the same luxury.  In fact, it is not unusual to wait for months for a Short Sale Negotiation to be resolved only to be informed that you have three weeks to close the transaction.

So be prepared!  Make sure that you have a valid pre-approval in place even if this means updating the document while you await a resolution to your negotiation.  During this period of waiting, refrain from the temptation to buy any major purchases for your intended home (or any large purchases of any sort) so the terms of your pre-approval remain valid.  While waiting, take the opportunity to line up services that you may need to contract for the home purchase such as Inspectors, Handymen etc.

HIRE A PROFESSIONAL…

One of the best investments you will make is to hire a Professional REALTOR who has experience with Short Sales.  The National Association of REALTORS does offer a certification for REALTORS (SFR).  Audu Real Estate has two individuals with this Designation.  In addition, we have successfully negotiated Short Sales since 2005.  We work with as a team which includes a title company that not only assists with the paperwork but has legal counsel available to review situations as warranted.

Lastly be flexible.  At times, you will be tempted to throw in the towel.  Dates may be changed, demands made which seem unreasonable.  You may have ordered your moving truck only to be told that the closing cannot happen as planned.  Being flexible will help preserve your dignity, your mind and the pleasure of enjoying a victory of a hard won battle.

WHEN YOU CANNOT AFFORD TO WAIT…

Although Short Sales and Forclosures can provide significant cost savings, there are times when you cannot afford the investment of time and/or money which may be required to purchase a property which is being sold in this way.  For instance, if you have just sold another property and need to move into another home within less than 30 days, it is probably not prudent to try to buy a home through a Short Sale unless you have alternate arrangements for lodging if the transaction cannot be completed within your time constraints. There are many homes being retailed today which will not require a Short Sale transaction.  If you would like to purchase a home, let us help you determine which route may be best for you.  We can also provide you with a FREE list of available homes in the areas and price range you desire.

 

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