A Buyer’s Quick Guide To

Preapproval

 - Get Preapproved so you know how much you can afford and how much you feel comfortable paying for a house. This helps make sure that you are looking at the right houses and your agent can be sending  you the right properties. When you see the right property you will be ready to make an offer.

- You will need to have a preapproval letter to submit with a short sale offer as the Seller and Short sale lender will want a copy in their file to verify that you are qualified. This can also help your offer look stronger should you be competing in a multiple offer situation.

Decide if you have the patience that will be required of you as a buyer in a short sale?

-In most situations it will take between 4 weeks to 4 months to get a response from the short sale lender. This time frame can vary dependent on a number of factors that involve the short sale lender(s), type and number of loans involved, loss severity, and the capability of the person negotiating the short sale for the Seller.

Some deals can be found going the short sale route but be honest with yourself. If you don’t have the patience to work through a 4 week to 4 month time frame a short sale might not be the best fit for you.

Make Sure that your Buyer Agent is on board with the short sale process.

- Some agents don’t have the patience for short sales given the 4 week to 4 month time frame.

It is reasonable to expect your agent be willing to do the following items to qualify the short sale property(s) that you are interested in:

-Check on the listing agent – how many short sales they have done in the last year or so and what their close ratio is – in other words how many does the listing agent close out of those that they take on as short sales. This can be a pretty good bearing on the odds of the success of the short sale.

-Check on how many loans there are on the property, what type of loans are on the property, who is the Servicer (short sale lender)

-Check on how the Seller will be dealing with multiple offers – will one be sent to the bank and others be held as backup offers, will all offers be sent to the bank?

All of these items will help you as a buyer qualify a prospective short sale property and decide what property is worth your time.

Writing the offer

 - Keep in mind that in most short sale situations sellers are in a tough spot – while this can be a good opportunity to get a well priced property – be sensitive to the sellers situation. There are different strategies on preparing offers. The following are items to consider:

- Pricing – does the offer allow you to come up a little should the short sale bank request a higher purchase price. Does this matter to you?

-Time frames – generally a longer, more realistic time frame that you are willing to commit to the process the seller may view your offer as stronger and may set your offer apart from others.

- Inspections – do you want to do it before or after the lender issues the approval letter? There are advantages and disadvantages to both.

- Title Company and Escrow officer – recognize that generally the listing agent will have the title company working on the file already and making sure that the escrow officer prepares estimated settlement statements, etc. can help minimize surprises as closing nears. Having you brothers, sister-in-laws friend be the escrow officer because you want them to may not be a battle to fight if you want to win the war.

Approval and Closing

- Once the offer and proceeds are approved by the short sale lender they will issue an approval in writing. Once this approval is issued if you haven’t done the inspection this needs to be done ASAP – concerning the inspection – most short sales are sold as is and the Seller is likely unable or very limited as to what repairs can be done. Make sure that your lender is aware of the time frames to get loan docs to title – most short sale lenders require the closing HUD 24-72 hours prior to closing. Encourage your lender to get your loan docs to closing early not late. If the closing is delayed it could result in additional fees to you as a buyer and if deadlines are missed there is no guarantee the short sale lenders will give an extension – this lands you as a buyer without a house and the sellers likely in foreclosure.

Make sure you address all these items on a short sale to be a well informed short sale buyer and you’ll increase the probability that you’ll find the right property for you.

This is not to be construed as financial  or legal advice and it is recommended that readers seek the advice of qualified professionals.