While our area has been fortunate enough not to see the extreme level of foreclosures, short sales, and distressed properties as some other areas of the country, we still have our fair share. It seems everyone is out for a bargain and that’s never more true than when you take on a short sale. Here’s the skinny on what you need to know about short-sale purchases in Northwest Arkansas.
What is a Short Sale?
If the home is being sold for less than the seller currently owes on the property – and the seller does not have the money to make up the difference at closing – that is considered a short sale. Because of the recent drop in home values, the economy, and a number of other factors, homeowners are finding that they owe more on a home than they can realistically get by selling it themselves. Therefore, they must get the bank or mortgage company (the holder of the lien on the home) to agree to sell the house for less than is owned on the mortgage.
A Short Sale is NOT a foreclosure. A foreclosure is when the seller’s lender takes title of the home and sells it directly or through an asset management company. Sellers attempting to stave off foreclosure often try a short sale as a better alternative, keeping their credit intact.
Short Sales are not for the Faint of Heart
Signs you’re a good match for a short sale purchase:
- Patience – Short sales can take anywhere between 45 days up to 6 months and longer to close. The more tied up the property is in additional debt or mortgages, the longer it will take. Make sure you’re time frame (and your nerve) is flexible enough to deal with a short sale.
- Financing – Cash talks when you’re talking short sales. This is why so many investors have gotten into the short sale game… they have the money to make good offers and back them up with a quick sale (if you’re lucky enough for that). If you don’t have cash, make sure to be well-qualified through a lender and you’ll be ahead of the pack.
- No Contingencies – Having a home to sell before you close? A short sale may not be for you. Tight time frame? Again, don’t try to buy a short sale… you’ll get burned.
Surround Yourself with Knowledgeable Experts
There are a few people you’ll need to get to know if you want to be successful in buying a short sale…
- Real Estate Attorney – Very few short sales are actually lender approved. That’s why you need a good real estate attorney covering all the bases to increase your chances of getting an approved contract. You’ll also need one if you have special needs, concessions, or language that needs to be written into the contract as your real estate agent cannot legally modify contracts, only fill in the blanks of approved contracts.
- A Real Estate Professional – Maybe you have a go-to agent that you use. Maybe you don’t. Either way, make sure the agent you use knows how to deal with and handle short sales. They are very different animals than traditional real estate and an agent that is experienced in the short sale process is worth their weight in gold.
- Title Company/Closing Agent – Title Officers can do initial title searches of short sale properties to see liens attached to the property. Beware of short sale candidates with multiple leins. These are extremely difficult to get a contract to closing. Any or all of the lien-holders could put a kind or a stop to the process. If you don’t have one you trust, ask your attorney or real estate professional.
Short Sale!? Why isn’t it called Long Sale?
Just to reemphasize this point… short sales can take time… lots of it. If you don’t have the time, nerve, and determination to wait, a short sale isn’t for you. Here are just a few other factors to consider…
Rejection – Lenders can’t give home away. They’d go out of business. So, they try to limit their losses. If you go in and low ball an offer on a short sale by 20%-30% don’t be surprised by a quick response… NO.
Crappy Terms – Even with an accepted contract, a seller or lender can back out of the contract with no repercussions. If either party wants to change or doesn’t like the terms… there really isn’t much you can do about it.
Don’t Expect Repairs – You can ask for them but don’t expect them. These properties say “as is, where is” in the MLS for a reason. Banks are already losing money, don’t expect them to shell out more for repairs, especially with a low priced offer.
I hope you enjoyed the short sale rundown. I know the process looks pretty bleak but there is definitely a great deal to be had if you have the will to see it through. Contact us if you feel up to the challenge and we’ll be glad to start searching for your next short sale as a primary residence or investment property. Get started on your own search now by visiting our online home search.