Submitting an offer on a short sale is the same as submitting an offer on any other property except a few minor details. Due to the nature of a short sales complexity, it’s best to choose an agent who has real experience on both sides of the transaction.
Even though you’re buying a home, a short sale listing agent that also helps buyer’s, will give you an advantage. This is why I pride myself in my ability to handle Palm Springs Valley short sale transactions.
First, have your agent find out how experienced the listing agent is with short sales. Though it may seem a little unusual to ask the other agent to provide their qualifications, it could potentially make a big difference. If the listing agent is experienced, they will likely have connections with asset managers at the bank, know what is expected by that particular Lender, and be able to communicate effectively about the progress of the transaction, timeline, etc. Talk this over with your agent and determine how you want to proceed.
Second, find out how many liens are currently held against the property. There is a direct multiplier between the number of liens and the level of difficulty of the transaction and time it takes to close. Your agent can get this information from a title company. To shed some light on this, just consider that for each lien holder, the short sale packet must be presented and negotiated, approved, and worked through.
You may or may not be able to find this out, but make sure and ask if there are any other offers. Most listing agents will not get into too many specifics about this, but at least if you know there are other interested parties, you can put your best foot forward. If the bank has already approved a previous buyer’s price, the listing agent may share that with you. This could potentially save the step of waiting for a price approval. This happens when the bank has approved a previous offer, but the buyer eventually backed out, though no guarantee. Lenders are known to change their prices too!
Once your deal is negotiated with the seller and presented to the bank, the waiting begins. Different banks have different timelines, but they are all ridiculously slow compared to a typical non-third party negotiation. Expect to wait at least a month for an approval, but be prepared to wait for several months.
Buyers often wonder why it takes so long. For the most part, the speed at which the file moves through the bank is a direct correlation to the amount of backlogged paperwork the bank is experiencing. There are literally thousands of these transactions happening across the country with the big banks. When you think about it, banks are losing money on short sales, so they probably do not want to spend money to hire tons of people to work on them. All in all, it will likely take 3-4 months to close your transaction on a short sale. For a cash transaction, the length of time could be shorter, but it’s not always the case.
After your offer is approved by the bank your contract’s inspection and financing contingencies will go into effect. You will have time, as stated in the contract, to seek financing. You will also have time to perform an inspection, and although most short sales are sold as-is, in rare cases, the bank may be willing to compensate for major problems, but that is not typical and should not be counted on. Should you choose to withdraw from the purchase, it is usually not a problem until after the due diligence and financing deadline. At that point, you will forfeit your earnest money should you choose to cancel the contract.
If you’re interested in buying a short sale in Palm Springs or surrounding areas, be sure to contact me to discuss what needs to be done to make your real estate transaction successful, and as stress free as is possible!