Short sale properties can be a great source of income for investors, and a great deal for home buyers.
You’ve heard the term short sale thrown around when it comes to real estate deals, but what does it mean? A short sale is a transaction where the bank has approved a loss on a current loan. Basically, they’re agreeing to let the current owner sell the property for less than they currently own on the mortgage. The bank is losing money, so they want to achieve an approved sale as soon as possible and get it out of their hair.
Generally the current owner has fallen behind on their payments and is trying to avoid a full foreclosure. A short sale allows them to avoid the credit disaster associated with foreclosure while allowing the buyer to scoop up the property for (sometimes) way lower than the market value.
Managing relationships is always the key to any negotiation.
For the bank, a short sale is an unemotional transaction. However, an owner may be letting go of a property with great emotional significance. You may have to take different approaches with every party involved in the short sale transaction to get the best result.
Data is on your side. Look up comps to get an accurate picture of the market, and seek out justifications for your offer prior to submitting a written bid. In a short sale, you have to get agreement from the owner and the bank(s) involved on the purchase price and the terms of the sale. If the seller has an agent, you can have your own agent negotiate with them to ease your own negotiation burden a bit.
Getting written permission from the owner to discuss terms with the bank can be really helpful, but check with a good lawyer to make sure you have the right documents before you ask the seller to sign anything that might violate California law.
Your relationship skills are super important during this process. The bank will often require days, even weeks, to respond to offers and move forward. Prepare for a slower process than a traditional sale. Often they request additional BPOs (Broker Price Opinions) or modify appraisals, and they sometimes like to involve different negotiators.
It can be intensely frustrating, so prepare yourself and don’t stress.
Get fully approved for any mortgage loan you plan to take on long before you make an offer on a short sale property. Make sure your lender can close at the drop of a hat, because once the approval comes for the short sale transaction, you need to be ready for escrow. They may ask for a closing within days.
We secure properties via short sale, and we work with many investors and buyers who are looking for great deals on properties in the Sacramento area. Give us a call (916) 907-6116 or get in touch anytime to find out how we can help you!