How To Buy A Short Sale

Last week I talked about having a short sale right down the street from an upcoming listing.  It’s not the greatest deal in the world, to have a house just steps away that’s being sold for less than what is owed on it, but it is what it is.  My sellers are realistic, they’ve got a house that’ll be priced right and will show great, and we’ll continue on.

One of the emails I received over the weekend asked, “Is buying a short sale something you recommend?“.  Kristina, if you’re ready for an interesting experience, then yes, buying a short sale here in the New River Valley is something I recommend.  Three things:

  1. Hard work is required. The bank has agreed to let the borrower – in this case, the homeowner – sell the house for less than it’s worth.  In all likelihood, you’re not going to get the belle of the ball.  The house is likely going to be in some state of disrepair (I’m not suggesting all homeowners who sell short do this, just suggesting that sometimes you’ll need a little more than elbow grease), and since the borrower has already shown they have no money to make the payments, they’re not likely to make any repairs, either.
  2. Losing the deal will happen.  When your offer goes to the bank for approval, it could very well be one of several offers on the same property.  And the bank will continue to accept offers until it makes a decision.  Don’t be surprised if, while waiting for a response from the bank, you learn that you’ve lost out to another offer.  Your agent should help you write as tight an offer as possible, but when push comes to shove the banks only care about the bottom dollar.  You WILL lose a short sale from time to time … the key is to lose as few as possible.
  3. Hope you’re not in a hurry. I thought about writing this point first, but saving it for last seemed more appropriate since we’re not in a hurry.  And I hope you aren’t, either, because buying a short sale will take time.  There’s no sitting down at the kitchen table and presenting an offer when it comes to a short sale – the offer is agreed upon the seller and THEN it’s submitted to an overworked “specialist” who reviews and approves everything.  Since this specialist is working on who knows how many hundreds of other files at the same time, it could sit for quite a while.  If you don’t have the time to wait, don’t – and if you do, I hope you’re patient.  Honey can cure a lot of troubles, but it’s not guaranteed when dealing with a short sale.

I’m sure I’m not the first to repeat this to their clients, but I constantly remind my clients that one of the greatest strengths of a good agent is their ability to be an unemotional facilitator in the transaction.  When it comes to short sales, both the homeowner selling the home, and the buyer trying to buy the home, need to ratchet up their ability to be unemotional, as well.  It’ll take time, and it might be ugly at times, but if you’ve got the patience you can buy a short sale.

Updated 2/2/10 2:10pm – Danilo Bogdanovic just posted a good addition to this post, entitled “How Long Do Short Sales Take?“.  If anyone would know it’d be an agent in the 51st state, Northern Virginia.

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2 comments

  1. Jeremy_Hart says:

    As I've said many times D, I am thrilled we aren't in the same position. Hearing the stories you guys have when dealing with shorts and foreclosures … I'm grateful. But I'm also not ruling out the possibility of a delayed rise in either of them, at least in some products. That's unfortunate – but should it happen, I'll know what to do.

  2. “51st state”? Nice one 🙂 Thanks for the shout-out!

    P.S. I hope you don't ever have to go through the same mess with short-sales that we're going through in Northern Virginia. Consider yourself lucky…VERY lucky!

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