The New Market Dynamics
Buying a home can be a VERY frustrating process if you are not knowledgeable about the types of sellers that exist in today’s marketplace. It is a fact, there is a growing number of homes offered for sale that will not close. Distress properties, pre-foreclosures, short sales, subject to bank approval… what does this mean to you as a buyer?
Buyer & seller negotiate a sale & the transaction closes timely. These homes are more likely to have been responsibly occupied and repaired as needed. In addition, sellers usually repair or negotiate home inspection issues that may be discovered by new buyer.
#2 Foreclosure / Bank-Owned / Corporate Owned
The Bank is the owner of the home. Once a deal is accepted it closes timely.
· SOLD as-is: No repairs and no disclosures
· Buyer must provide lender pre-approval and typically additional purchase addendums
· Typically do not help in costs to buyer
· Generally request closing in 30 days or as soon as possible
#3 Short Sale / Pre-Foreclosure
Buyer wants to buy, seller wants to sell – however, there is not enough money to complete the transaction. The seller owes more back to the bank than the buyer is willing to pay.
In this situation the seller will accept the contract with a contingency “SUBJECT TO BANK APPROVAL”. There may be more than 1 bank involved to clear sellers obligations. This process will take a minimum of 90 calendar days up to 6 months and sometimes longer. Short sale market standards mandate that sellers accept multiple offers, which means your offer, will not be the only offer under consideration. Rarely does the bank disclose the number of offers collected or the position your offer is relative to any other contracts presented. The bank may keep your offer or accept a higher offer.
What should be the expectations of the buyer on a short sale purchase:
· SOLD as-is: No repairs
· Stressed ownership: Property may not have been managed or repaired appropriately
· Frustration: Weeks/months will go by with no progress/updates from the bank
· Competition: Unknown if you’re the only offer or how many offers are being considered by bank
· Sellers Qualification: To be a valid candidate for short sale, seller must prove hardship; many sellers have assets and liquidity that would preclude/disallow bank to accept short sale. Typically not determined until months into process
· Bottom line: Bank may decide to re-negotiate purchase price “prior to close”
· Availability: Home may go back to bank in foreclosure before getting an answer from the bank
· Loss Rate Lock: Buyers will lose their rate lock due to time expiration
· Loss of power to buy: With daily continual lender restrictions, loans available today allowing you to be a purchaser can be gone along with your ability to buy
· Close of escrow: Rarely, if ever, do these deals close timely
· Close of escrow stats: 2% of all short sales actually close while 87.8% of other sales mentioned sell and close.
· Interim housing: Are you willing to make interim housing plans with the high risk and no guarantee of closing?
Have you ever heard the saying “sounds too good to be true?” Can you afford to risk losing time, money, effort and the home of your choice by fooling with a property that doesn’t have the power to perform?