Is A Short Sale A Good Buyer Opportunity?
May 17th, 2008 categories: Featured Properties, Short Sales
The topic of foreclosures and short sales in a hot one in Phoenix and around the country. The short definition of a short sale is when a seller owes more on their mortgage than what their property is worth.
If that seller must sell, then offers can be presented to the lender than owns the mortgage to see if the lender will accept less than what is owed to satisfy the mortgage.
Unfortunately most lenders will not even look at a short sale (short pay) offer unless the seller is in default of their mortgage. Sellers are faced with either getting a short sale approved or going to foreclosure. Do these situations present good buyer opportunities? The answer is yes, but it takes patience.
If you are a buyer who needs to buy within a certain amount of time, I do not recommend offering on a short sale. It can take sometimes months for the bank to approve. This can be very frustrating for the buyer who not only has to wait, but may not even get the offer accepted. There may also be multiple offers submitted to the bank and you won’t even know if you are the best offer. My recommendation would be to offer on a bank owned property, new construction or a seller who can accept your offer promptly.
If you have time and patience, then you may want to offer on a short sale. The good news is the buying experience is much like a traditional sale once the bank approves your contract. You have a due diligence period, the transaction runs through a title company and you can get traditional financing. The benefit of the short sale is that the contract you write is not an accepted contract until the banks approves. This means that you can continue to look at other homes and cancel the contract at any time. You also do not have to escrow any earnest money until the bank approves your offer.
Short sales are great opportunity for investors, especially those with cash. The lenders tend to like the cash offers as the closing tends to be quicker and less chance of the deal falling through due to financing. The ability write multiple offers with no commitment is also attractive.
The real estate market in Scottsdale and surrounding area is very opportunistic. I am telling my buyers that it is a great time to buy. There are great buys all over the Phoenix Metro area, but you have to know what you are doing and understand the differences between traditional sellers, bank owned homes or short sales. I also recommend having a Realtor who is proficient in all of these arenas. I have closed several short sales and would be able to consult with a buyer as to whether or not a short sale is a good idea for you. Call me anytime if you just have questions. Reach me direct at 480-201-4185. – Kim
Copyright © 2008 The Sunshine Broker | Desert Ridge Real Estate Blog 
Hi Kim,
I’ve personally had a lot of frustration when it comes to getting a short sale to close. I’ve probably only closed about 20-25% of the deals I’ve worked on. Are you having better luck over there?
There’s also another strategy being used especially when a seller has a huge aversion to the credit ding of a short sale. Provided the sellers aren’t too far behind on payments, the home can be put in a special kind of trust in which both the seller and the new buyer are beneficiaries. The “buyer” just puts a little money down, takes over the payments and lives in the property, and can get the tax benefits of ownership, so they can pay more than market rent (to cover the mortgage payment).
I’m still learning more about this technique, but it seems like a strategy that will work in some situations.
Dawn,
This is a technique that works well when there is some or very little equity, but it will not work well when the property is over leveraged by $50,000 or more which is what we are finding so frequently. Also, if the seller is behind by several payments, the buyer would have to bring enough of a down to “cure” the mortgage. Kim
Kim,
Great insight on short selling. I wish I had some cash to take advantage of one. I especially like the idea that I can keep looking if the bank is dragging it’s feet. Thanks! Nice blog by the way.