The term “short sale” became more and more common when the real estate market has taken a plunge. Distressed properties are still common as our market is recovering and they certainly offer a unique opportunity for the right buyer. The question is: Are you that buyer?
Are you patient?
Short sales take time and involve a degree of uncertainty for an extended amount of time. Because the bank is accepting less money than what the borrower owes, they are involved in the decision making process. In fact they often have the final say in what gets accepted as a Seller’s choice is limited to negotiating an agreement that satisfies his creditor (the bank) or allowing the bank for foreclose. It is typical to wait 30-90 days for a short sale to be approved, although it can take longer in some situations.
Why does the process take this long?
First of all, banks are dealing with a limited staff who are typically handling in excess of 100 files per person (sometimes 400-500). Many times it takes 7-30 days just to get the short sale package (including your offer) to the correct person. Once the person receives the file, he/she will order an appraisal or BPO (Brokers Price Opinion) on the property in question. The appraiser will make an appointment with the seller’s Agent to view the property. Once the BPO or appraisal is returned to the bank, the negotiator reviews the asking price versus the current “market value”. They will then either accept your offer or counter it.
Making Counter Offers (A.K.A More Time Involved)
After the bank makes a decision, they may counter your offer. You then have a choice to make. You can accept their counter-offer and allow them to issue an approval letter or you can counter their offer. If you counter their offer, they may take some time to consider it, but it won’t be as long as the initial waiting period. Still, those buyers who have a time limitation on buying the home may end up taking a counter-offer higher than they originally would have been comfortable with simply for the sake of expediency. If you are not in a hurry you have the opportunity to get a better deal by extending negotiations. Keep in mind, though, that the bank’s patience will be limited. Your Realtor can advise you on the best course of actions when it comes to counter offers and what number to ultimately accept. A short sale is a good deal, not a steal.
Why is a Short Sale such a good deal for Buyers?
Simply put, you can get a home for about 7% to 8% below market value. That discount is your reward for waiting while the bank completes their approval process. Since the bank is looking at the possibility of having to foreclose, owning the property, and then trying to sell it at current market value, they are sometimes willing to go somewhat below market value as a way of keeping their losses to a minimum. Getting a home below market value is always a good deal, and is a great way to begin your home-ownership in the black. With the market being as unstable as it has been, buying for under market value is now more attractive than ever. If you have the time and a savvy agent to represent you, buying a short sale can be a tremendous opportunity in today’s Tucson market.
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