Britta Rivera Venture

CHICAGO REAL ESTATE NEWS & MORE

CHICAGO: TIPS ON BUYING A SHORT SALE; BE PREPARED TO WAIT

Most would agree that now is the best time in decades to buy a home.  Everyone wants a great deal and the lowest interest rates available.  While there are many success stories of homebuyers securing properties for 20% – 40% below market price, there are also several misconceptions.

Many in the market to buy a home, want a short sale or foreclosure.  But most do not understand the challenges faced when making that decision.  The tips below are designed to help homebuyers, from a Chicago real estate agents perspective.  One thing that’s clear in this unique market…rules seem to change daily so potential short sale buyers, need to be flexible.

If you are interested in securing a short sale property, this just may save you a lot of time. While assisting many buyers with their short sales purchase, these have been the most common things to note.

TIPS ON BUYING A SHORT SALE

  • First it’s important to learn the definition of a Short sale along with the process.  Read this link and watch video to educate yourself on the process.
  • The short sale review cannot begin until a contract from a qualified buyer is submitted to bank.
  • They can take anywhere from 2-4 months for bank approval (even in the case of an “approved” short sale), which is required prior to closing .  In most cases, you will not hear anything for at least 45-days.  On average they take 90-120 days from start to finish.  PATIENCE IS KEY!
  • When submitting a contract, you must also have a pre-approval letter from an approved banking institution.  GET A PRE-APPROVAL LETTER PRIOR TO STARTING YOUR HOME SEARCH.
  • When submitting a contracts, sellers typically require an earnest money deposit in the amount of $1000 (but this varies).
  • It is important to note; the price of the home is set by the seller based on area comparables.  Although the seller may accept your offer the short sale list price does not mean the bank will approve it, so be prepared for a counter offer.
  • If counter offer is re-submitted to bank, expect to wait at least another 30-days for a response (in most cases).  To save time (if this amount is within market price) consider accepting it quickly.
  • Banks not only approve price, they must also agree to allow seller to move forward with the short sale.  The hardship of the seller is reviewed by the bank negotiator and requires approval.  Most are approved but depends on bank and if they have a second mortgage or investor on their loan.
  • Once the bank approves a short sale, they expect the buyer to move quickly to secure a mortgage committment and close.  Although you may wait for months for approval, the bank will not.  This may seem unfair, but they are all about business and are in total control of the transaction.
  • In some cases, the bank does NOT allow a full release of the shortfall.  Therefore, the BUYER or SELLER may be asked to contribute toward some of the shortfall.  Be prepared to have additional funds available to close the deal, because typically the seller is not in the position to pay.   These amounts vary, but typically are $2000 – $10,000.
  • Use an experienced licensed real estate agent in your state who is familiar with the short sale process.  These are complicated transactions and require assistance by a knowledgeable short sale expert.
  • If you have a rental lease, ask in advance if your landlord will allow an extension if needed.  Closing timelines vary greatly and no matter how “fast” you’re told it will be, they usually require additional time.
  • Multiple offers are common with short sale homes priced well, so be prepared and present your best offer if you are really interested, or you may lose out.
  • In condo buildings, many short sales are not “warrantable”, meaning you MUST pay cash.
  • Always read notes on the listing sheet for terms of the sale.
  • Experienced agents may use a short sale negotiation company to streamline the process.  In many cases, this could shorten the timeframe by 30-60 days.  The buyer will typically pay the cost of this service, out-of-pocket at closing or through a closing cost credit requested at contract.
  • CASH IS KING!  Many short sales have multiple offer situations.  If you have cash and bid against someone with a mortgage contingency and similar contract terms, you likely will win.  However, paying will cash only save about 30-days in the process, since after bank approval there is no wait for securing a mortgage.
  • Do NOT miss your closing deadline.  In the event you do, the approval is typically void and you have to re-start the entire process.
  • REMEMBER RULES CHANGE FREQUENTLY, SO ASK YOUR REAL ESTATE AGENT FOR NEW UPDATES.

Potential buyers have asked; “Why are banks so slow to respond?”   This is a great question and I believe they are just not equipped to handle the workload.  And more than likely, a short sale negotiator for the bank has hundreds of files.  So you can imagine they are probably overwhelmed.   Banks are also losing a lot of money on each deal, so certainly are not in a hurry to lose more.

If you need assistance buying or selling a short sale in CHICAGO,  feel free to contact BRITTA RIVERA VENTURE at 312.475.4548 or brivera@comcast.net.  WATCH SHORT SALE VIDEO HERE.

Britta Rivera

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January 31, 2012 - Posted by | CHICAGO REAL ESTATE | , , , , , , , , ,

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