All About Real estate Short Sale, Top 5 Tips for Short Sale

Today’s topic is going to be “real-estate short sale” which is growing fast in the market field of real estate and also for banks

The simplest definition of “real-estate short sale ” you need two things to happen

In short sale, The seller needs to be at least 30 days behind on their payment. The first component is mortgage delinquency. The second component is negative equity which means the assessed value of the property is worth less than what they owe on the mortgage statement.

For Example: A person owns a property and that person falls behind the mortgage payments, properties worth $500k. But that person owes $550k to his mortgage company.

That means that person is underwater, he is behind the payments so the bank is gonna let him sell for the $500k which it is worth and they’re going to forgive the debt, they’re going to forgive those $50k and it is not recorded as a foreclosure on that person’s credit.

How can we buy those real-estate short-sale properties?

First of all, you need to know that only eligible people can buy these short-sale properties or the people who got selected by the bank can trade in these short-sale properties. However, let me give you the top 5 tips which will be more useful for you when you are going to invest in Real-estate Short Sales.

1. The biggest is there is no guarantee

The first and probably the biggest is there is no guarantee. Listen carefully, there is no guarantee that you’re going to be entitled to buy that short-sale property. Even with a fully excluded contract between you and the seller. Unlike a traditional sale, the seller’s lender does not have to allow and approve the short sale to happen.

And in some cases that property could end up in foreclosure depending on how far along the bank is with the foreclosure proceedings. In other cases, the seller might have temporary financial issues and might be able to get that mortgage whole and essentially cancel that real-estate short sale altogether. And in most cases, the seller does have an out if that were the case.

2. The status of the short sale

The number two is you’re going to want to know the status of the short sale this is where if you are working with you know your real estate agent, your real estate professional. They should be familiar with the short sale process. Hopefully, they are and they are going to want to know the status of the short sale so that they can contact the listing agent hopefully listing agent has some experience in dealing with short sales.

So you’re going to want to contact the listing agent and find out exactly where they are at with the short sale process. Find out if they have completed a short sale package for the bank and all the Intel and information is ready to be submitted to the bank with an offer. Also, find out where they’re at with the foreclosure proceedings.

3. Time Frame

Number Three is “Time Frame” You gotta understand short sales are not like traditional sales, they could take four to six months. Sometimes it could happen sooner, sometimes it can happen much later. I’ve had certain short sale listings go as long as the year even 16-18 months. So if you’re a real estate agent working with a buyer. You’re going to want to make sure that the buyer is prepared to wait for the long term.

Also, if you’re a buyer, you’re going to want to find out about opportunity costs. In most cases, you can get the short sale slightly discounted sometimes 8-10 per cent. Now, the real estate short sale is a rare deal that happens secretly under the segments.

4. Escrow

The number four is Escrow. Most listing agents as well as the sellers of the short sale want to ensure that the buyer is serious and in most cases. You’re going to have to submit an escrow deposit along with the contract. In my suggestion as a buyer, try to get away with as little money down as possible to secure that property for escrow and then in the contract put maybe a second deposit after the short sale has been approved and you have it in writing that you guys are proceeding. Proceeding towards successful closing and then you go ahead and submit that second deposit.

5. The last and number five is “Price”

The last and number five is “Price”. Just because you and the seller have agreed on a contract term and a price doesn’t mean that the short-sale lender is going to agree to that price. They are going to go ahead and order which is known as BPO (Broker’s Price Opinion) to get an idea of value. Sometimes they even order an appraisal and if your offer is usually within 8 to 10 percent of that valuation, many times the short sales negotiator is going to approve that contract to prove that sale.

But you’re not guaranteed that you might have a short sale negotiator who is instructed by the lender to strictly only look at offers that are based on that valuation from the BPO or appraisal. So again you might come with a contract of $400k and that BPO might come in at $450k and then. Short sale negotiator flat out and says no, they’re not going to take that $400k offer. So you may wait for 6-8 months to finally get a response from the lender and get the valuation only to find out they’re not going to proceed forward with the purchase of it because it doesn’t make sense at a certain price.

So if you’re a real estate agent and interested in listing and selling short sales properties. Click on the link down below for another article that I have on exactly.

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