Hey guys, Nicole Espinoza with the Short Sale Queen, today I want to give you three tips on how to purchase a short sale.
When you’re a buyer, or you’re representing a buyer, in a short sale transaction, it can be super frustrating. And the reason why is that you ultimately have no control of the transaction, you’re solely depending on the listing agent to provide relevant information. Hopefully, they know what they’re doing.
So I want to give you guys a couple tips to navigate the process because you’re just trying to purchase property or you’re just trying to represent someone to purchase the property. It’s not up to you to know or to actually facilitate the process. It’s supposed to be the agent.
So the only thing you can do is ask the right questions to make sure. “Do I want to move forward? Am I wasting my time or is this something that’s actually going to close?”
So the first tip is you need to ask the listing agent, “is this an approved price”?
This is probably THE most important question because the assumption for the public is that if you put a house on the market, and you list it at a certain price, that’s the price that they’re willing to accept, right? Well, in a short sale the lender, ultimately is the one that is going to indicate how much they’re willing to accept.
So once the real estate agent gets a listing agreement, generally, they don’t wait for the lender to indicate how much they’re willing to accept. Generally, they just put the house on the market, and they try to get an offer to Submit for Approval.
Well, the problem with that is that you could submit an offer for $100,000, and the bank could come back very realistically at $150,000. And then you waited months, weeks, however long it took to get a response, and now they’re countering much higher than your contract price which is can be super frustrating, especially if you’re capped at a certain number or you’re only willing to pay a certain number.
Now, this doesn’t necessarily mean that you’re wasting your time if the bank hasn’t approved the price yet, but understand realistically, if you’re a buyer or you’re representing a buyer and you have a certain timeline, like you’re relocating, and you need to move within the month or your lease is up, and you only have a certain timeframe, putting in an offer for a short sell that is not approved, might not be the best idea. Just because we ultimately, and I say we as the listing agent, ultimately do not determine how long it takes.
The only thing that I can do and my team can do is try to move it along as fast as possible. Understand that the majority of agents out there have no clue what they’re doing. I know that’s a pretty bold statement, but I also know from experience that most of the agents don’t understand short sales.
There’s a reason why it is a niche, because dealing with the bank is a whole other ballgame. You have to understand that every lender and every investor have different guidelines, and they have a different process, you could do a Chase FHA short sale, and then do another Chase that’s a conventional and have a completely different experience. So, I can confidently say that statement because most agents will only do one or two short sales, most of them not being successful. If you have done a short sale before, comment below. I’d love to see the gauge of where people are watching this.
But most of the time agents do one or two short sales, and then they give up because they’re like “this is way too much work”, because they don’t know the questions to ask. Also understand that the agent is just the messenger.
Ultimately the bank is the one that is determining the guidelines and determining whether you are going to be approved as a buyer or the seller is going to be approved, so it’s not up to the agent. The only thing that the agent can do is try to move it along as quick as possible. The second tip I have for you as a buyer or representing a buyer is to ask, how many liens Are you negotiating to the listing agent? The reason why this question is so important is because one off the bat, if the agent doesn’t know the answer to that question, that should be a huge red flag that they have not even pulled title.
The reason why that’s so important in the very beginning is because if they go through the entire process and let’s say, negotiate your offer, but then didn’t realize that there’s a second lien, there’s HOA liens, taxes or whatever the case, they’re going to have to start the process all over because the bank dictated their approval and their terms off of what they submitted. So it’s not as simple as saying, “Oh, hey, you missed something.” If they already got approval, the bank will either come back and say “Tough luck someone else pay for it”, or say “hey, you have to resubmit everything because now our net and all of the terms change.”
So one, make sure that they know how many liens and two this will also give you an appropriate timeline, that if there are two mortgage liens, understand that the first needs to be negotiated, and once that’s approved, they have to now go to the second mortgage and get them to also take a loss, which can extend timeframes.
For my office, our average is three months of processing from start to finish. But the industry standard is six months to a year IF it gets approved. And I’m not trying in any way to talk you out of purchasing a short sale, I want to give you these tips on questions to ask so that you can feel more comfortable in putting in an offer for a potential short sell.
The third tip I have for you is “how far along are they in the process?” You want to ask that question, because if the agent has just got a listing agreement signed, stuck the house on the market, but hasn’t actually done anything with the bank, you need to understand that you are at the very beginning.
They haven’t even started the process, which means that the bank has not even reviewed the application, they haven’t reviewed the sellers’ financials. First before they can even get to your offer, the seller has to be approved for the short sale.
So you could present the bank with the best offer, I’m talking about the best that they’ll ever get, and it will not matter if the seller does not get approved for their financial hardship. So all of that needs to be done before they even consider reviewing your offer to be able to counter or accept. So understand that if they’re at the very beginning of the process, you are still months and months out from even getting an answer.
Again, as a buyer or a buyer’s agent, you want to keep that in mind, so that you know your timeframes in purchasing this short sale.
Hope that helps if you guys are looking for a more in-depth understanding of the process I did write my book “Short Sales Uncensored, you can get this on Amazon we will drop the link so you guys can click on and don’t forget the only Short Sale group worth being a part of on Facebook. If you guys have any questions, it’s a great community that I built and make sure that you are subscribing and hitting the notification bell so that you guys know every week when we put out content. If you guys have something specific that you guys want me to talk about, put it in the comments, and I will do my best to put that out there. Until next time!