5 Short-Sale Tactics That Never Work
Save Yourself A Headache... or 10
Short-sales are in high demand. Home buyers are aware of the potential savings a short-sale offers and they are making offers—lots of them. However, as a real estate agent I have watched offer after offer get tossed in the trash because the lenders don’t have time to play games. If you want to save yourself a few headaches, take a look at this article before you make these same mistakes.
Wear ‘Em Down Until They Give In
One of the most frustrating periods of a short-sale begins once an offer has been submitted to the bank for approval. We wait and wait and wait some more. It can be a true test of patience. One strategy often employed is to bombard the banks with phone calls and emails until they respond just to get some relief. In reality banks and mortgage service companies are overwhelmed with short-sales, foreclosures, and loan modifications. Incessant calls and emails are one guaranteed tactic that will ensure your offer gets moved to the bottom of the pile. No one likes to be harassed and I can promise you this won’t work.
Reality Check: Have patience. If you don’t have time to wait then drop the idea of buying a short-sale. You’re not a candidate.
Make Ridiculous Low-ball Offers Until Someone Bites
Frankly, that ship has sailed. That’s not to say that you cannot get a good deal when purchasing a short-sale home. However, EVERYBODY AND THEIR DOG is looking for a short-sale bargain and many of them attract multiple offers. Keep in mind that the BANK DOES NOT OWN THE HOME yet. When a short-sale offer is made it first has to go to the current homeowner for approval. In many cases that homeowner will have some kind of responsibility for the difference between the sold price and what they owe on the mortgage (the deficient amount). They may have to sign a promissory note and work out a payment plan for the deficient amount. If your offer creates too much deficient liability for the home owner, they won’t even consider it. They will most likely wait for something more reasonable.
Likewise, once the offer gets past the homeowner and get submitted to the bank, it is still subject to an appraisal or Broker’s Price Opinion (BPO). In other words the bank has a pretty good idea of the home’s current market value. If your offer is WAY below this value, forget it. Seriously, forget it. Not gonna happen. Nagonnahappa. Please, step away from the short-sale before someone gets hurt.
Reality Check: Save everyone time and energy by making a reasonable offer. That is not to say that you cannot purchase a short-sale home below market value. Indeed you can. But “pennies on the dollar”? No, you can’t.
Get The Homeowner or the Bank To Perform Repairs and Updates
Remember, a short-sale is NOT a bank-owned property. Any repairs would have to be done by the home owner and not the bank. Before someone can sell their home as a short-sale they have to demonstrate they are currently in a hardship situation. Often that means loss of a job or a dramatic drop in income (perhaps the primary income earner is now deceased). In a hardship scenario do you think they have the money to do repairs? Probably not.
Although there may be a few exceptions, you need to plan on doing any necessary repairs yourself. You will be able to get the home inspected and determine if it is worth the sweat equity. You can also make an offer reflective of the home’s condition. Keep in mind, also, there are loan programs available that may be able to help provide money for repairs.
Reality Check: Short-sales are bought and sold, AS-IS.
Pursuing A Short-Sale Without Good Credit
Statistics show the largest percentage of homeowners selling a distressed property (short-sale, foreclosure, etc.) had less-than-average-credit scores when they purchased. The banks are not about to take that risk again. As a result, lenders are looking at detailed credit history now more than ever. It is important to get your financial house in order BEFORE you make your first offer. If you don’t there’s little chance that your offer will be considered.
Reality Check: If you have poor credit, forget buying a short-sale. In fact you will have a difficult time purchasing ANY home. Gone are the days of financing for marginal credit borrowers. Your first step is to address your credit issues. In some cases you may be able to improve your credit scores by pursuing a credit rescoring strategy (NOT credit repair). Some clients have improved their scores from non-qualifying to qualifying in a couple weeks.
(This one is for the Sellers) Trying To Sell Your Home As A Short-Sale Without A Hardship
For you homeowners looking to get out from under your home, a short-sale might work. However, a primary requirement for getting your home approved is demonstrating a genuine hardship case—or an inability to pay. If you have any assets that can be liquidated to pay back the lender, then it’s unlikely that you will be approved for a short-sale. If you have any equity in your home, your chances of getting your short-sale approved by the bank are slim.
Reality Check: Not everyone qualifies to sell their home as a short-sale. The bank always has the last word. You may have other options available to you, so be sure and speak to a qualified real estate agent who can assist you with a game plan.
Regards,
