3 things I wish I had known before buying a Short Sale

Buying a home in today's market can be hard, especially since interest rates are going up and there aren't enough homes for sale. Since short sales and foreclosures are priced more reasonably, they may become more attractive options. Whether or not a short sale property is right for you is primarily determined by your budget as well as your property needs and wants. If you want to buy a short sale property, you should be prepared to wait at least 3-6 months or more in most cases, and your transaction will vary.

Here are three things you should know before making an offer on a short sale home:

1. There is no such thing as a short sale.

The timeline will be longer than a traditional sale because it involves the seller's lender or lenders if the property has two or more mortgages, as well as agents who do not have experience with short sales or have poor follow-up with the short sale lender(s).?This can work both ways because both agents must collaborate and support one another with documents and updates in order to hold each other accountable.

Finally, because the short sale lender(s) must approve the short sale contract, it can take weeks or months before you know if your offer has even been accepted, let alone countered. The good news is that you can either turn down the counteroffer or make one of your own. Simply because the seller accepts your offer does not mean the bank will do the same. If your offer is much lower than the list price or similar homes in the area, be ready to share information like repair estimates and photos of the damaged parts of the home. A home that is outdated or has dirty carpet, a home that needs to be painted, and normal wear and tear do not justify a significant price reduction. Everyone will lose time as a result of this misconception.

2. Short sales are offered as-is, where-is.

What you see is exactly what you get.?The short sale lender will not make any concessions, such as repair credits or closing costs, unless you are an owner-occupant with a government-backed loan. If your offer is less than the list price, you should be prepared to take photos of any damage that you believe is the reason for your lower offer; however, you should always get an inspection so you know exactly what you're getting into when you buy the home. Get the HOA or condo resale documents and check to see if there are any HOA or condo violations so you can take that into account before putting in an offer. The seller isn't likely to fix any problems, so you'll have to do it right away after closing.

3. Short sales aren't always a good buy.

When a short sale listing is listed, it may be listed for less than it's worth in order to attract buyers or, worse, to fool a short sale lender into believing the home's value is much lower than nearby comparables. It is common for agents to list a property to sell to a regular investor in order to double dip on commissions; however, this does not guarantee that the home will sell for that price, resulting in the property becoming active again at a much higher price, often near fair market value. When this kind of transaction happens in a short sale, agents and investors often put sellers at risk of foreclosure because they try to get banks to take much less money and waste a lot of time. If their investors aren't happy with the bank's counteroffer, they walk away from the sale, putting the seller at risk of foreclosure. You should always check to see if the home has a scheduled foreclosure sale date, which could result in you wasting time and effort because the short sale lender may have grown tired of the listing agent's attempts to persuade them to accept a lower offer. The good news is that when this happens, the seller's agent is forced to quickly re-list the property at the counter price, which is usually a pre-approved price, shortening the waiting time if you decide to submit your offer and, of course, after checking to see if there is an upcoming foreclosure date. Sometimes a buyer gets tired of waiting for a short sale to be approved and decides to move on, which means the price has already been approved. In the short sale process, the lender typically does not evaluate the price until there is an accepted contract, at which point the lender will order an informal appraisal (a "broker price opinion," or "BPO," for short) to justify the contract price—because they want to get as close to market value as possible.

Keep in mind that a seller may be willing to accept a lower offer than the list price for any reason or on the advice of their agent. The short sale lender's goal, on the other hand, is to minimize their losses by accepting an offer close to or at the BPO value. The seller should also think about how selling for less than they expect will lead to a bigger deficiency balance and possible tax consequences. This means that if sellers sell for less than they should, they will have to pay bigger penalties. A short sale is a good way for a seller to avoid foreclosure and can be a better bargain in low inventory real estate markets, but it must be a win-win situation for all parties involved, including the short sale lender(s.)

Selecting the best short sale agent for the job.

Before you think about buying a home that is a short sale, you should talk to a real estate agent who has experience with short sales. You should be able to interview agents to find the best fit for you and ask about their experience with short sales. You should also be able to verify the agent's personal sales history by calling past clients and getting feedback. The experience of an agent should not come from a team or a brokerage, but from their own personal sales history. If you work with the right real estate agent who has proven short sale experience, you can go through the short sale process with confidence and avoid possible problems.

Tony Rivas began working in real estate shortly after graduating from high school in 2005. He enjoyed meeting new people and building relationships in the community. He had early success, and his business grew, so he bought many investment properties and helped his clients buy and sell as well.

However, in September 2009, he declared bankruptcy and lost everything, as did many other homeowners during the Great Recession. During this difficult time, Tony spoke with his mortgage companies and learned how to apply for and receive loan modifications as well as how to do short sales to avoid foreclosure. He saw that many struggling homeowners needed the same help that he did, so he began helping his community and guiding struggling homeowners to keep their homes from going into foreclosure, just as he had done for himself.

Today, Tony has assisted over 211 homeowners in risk of foreclosure to modify their mortgages and over 141 homeowners in danger of foreclosure to short sale their homes. He has accomplished this by educating?homeowners about the sustainability of homeownership and the risks and rewards of real estate. This has resulted in the expansion of his business, which is driven by his desire to prevent 10,000 homeowners from losing their homes to foreclosure and become the nation's leading real estate resource.?Tony has been a licensed real estate agent for 17 years and has real estate licenses in Maryland, Washington, D.C., Virginia, and West Virginia.

Tony Rivas can be reached at [email protected], at 703-955-9222, or through the useTonyRivas.com website.