If you are looking to buy a home in the near future, there is a good chance a lot of the properties you look at will be short sales.  The Lawhead Team would like to share some helpful short sale tips for prospective buyers.

A short sale is an attempt by the current owner to sell a home instead of the bank taking it back to partially save their credit and lift the burden of the huge mortgage debt they were paying.  Unfortunately, with a short sale the entire process relies on the hope that the bank will take a loss, approve the sale and eliminate the costly process of foreclosing, clearing and reselling a home.

This article, “Making an Offer on a short sale? What You Need to Know” is from Realtor Magazine.

You’re a good candidate for a short sale purchase if:

• You’re very patient. Even after you come to agreement with the seller to buy a short sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
• Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
• You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you’re serious about purchasing a short sale property, it’s important for you to have expert assistance. Here are some people you want to work with:

• Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
• A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
• Title officer. It’s a good idea to have a title officer do an initial title search on a short sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short sale properties include:

• Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
• Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
• No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

If you are in the market for a new home, please call The Lawhead Team for all your Real Estate needs. Article can be found at: http://realtormag.realtor.org/sales-and-marketing/handouts-for-customers/for-buyers/making-offer-short-sale-what-you-need-know

With Short Sales making up a large majority of the real estate market, home buyers are forced to consider purchasing a short sale property.

While buying a short sale may not be the most pleasant real estate transaction, it is still doable and The Lawhead Team would like to provide some tips to making sure you are fully prepared to start your short sale buying process.

A short sale is an attempt by the current owner to sell a home instead of the bank taking it back to partially save their credit and lift the burden of the huge mortgage debt they were paying.  Unfortunately, with a short sale the entire process relies on the hope that the bank will take a loss, approve the sale and eliminate the costly process of foreclosing, clearing and reselling a home.

The potential buyer should keep these tips in mind:

• It is better to have a loan owned by one bank than two: If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. Buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. 
• The bank doesn’t set the price, they agent and seller do: The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.
• Lowball offers are rarely given the time of day: Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.
• Price should be based on comparables in the area: The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.
• Don’t get attached to the one short sale you’ve put an offer on: Despite their name, short sales are normally not “short”. It can sometimes be a very long process. Don’t get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. It is usually a good idea to have multiple offers out at the same time just in case the one you want falls through.
• If you are looking for a faster deal, put an offer in on an “approved” short sale: It is important to remember that short sales are not always timely; however, making an offer on an “approved short sale” can be a quicker process. An “approved short sale” has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn’t end up buying the property. These types of short sales are some of the most highly desirable.
• The bank ultimately has all the power: The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.
• Buyer is responsible for any repairs: If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.
• Once the approval is made by the banks, you must close on or before the closing date: During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We’d advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don’t just assume it will happen.

Short sales can be a great opportunity to find your new home at a competitive price. A short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. Remember to contact The Lawhead Team for all your Real Estate questions and needs.