Buying a Short Sale: What a buyer needs to knowPosted On: January 2012
ASK AN ILLINOIS REALTOR, WITH TIFFANY BREWINGTON
My Realtor sends me listings that say they are in “short sale.” What do I need to know if I plan to purchase one?
When a house is listed for “short sale”, it means that the proceeds of the sale will not cover what the homeowner owes to their lender on their mortgage.
What a buyer needs to know before buying a short sale
Who gets paid in a short sale?
- The lender receives the proceeds of the sale; the homeowner does not. The lender is actually the entity paying the Realtor’s commission as well. Since the lender is losing money in the transaction, they will have likely negotiated the commission paid directly with the listing broker, who will share the commission with the buyer’s broker.
Make your offer contingent upon the lender’s acceptance
- If the seller approves your contract, then typically the seller’s Realtor or Attorney will forward a “short sale” package, including your contract, over to the seller’s lender for approval. If the lender does not approve it, the deal may be dead, or the buyer may have to make a higher offer.
Longer Wait time for Contract Approval
- A short sale real estate transaction may take weeks to months longer than a traditional sale, because the lender and all lienholders have to approve the sale, even though you may have a signed contract on the property. List a time frame on your contract for the lender to approve the sale, after which you will be free to cancel.
Paying off extra lienholders
- The sale cannot go through unless there is clear title, and if there are additional leinholders that the homeowner owes money to, they will want some money before they will remove their lien(s). These are usually negotiated by the seller’s Realtor or Attorney, and can be negotiated down to as low as 10% or less of what they are actually owed, however, they are not obligated to take any less than the full amount they are owed. If a buyer has a contract on a house, but the additional lienholders are an issue, it’s possible the seller may ask the buyer to come up with more money to satisfy the additional lienholders.
No repairs are quite common
- It’s very possible that the home will be advertised in as-is condition, with no repairs being made by the seller. This doesn’t mean you should waive your right to a home inspection.
Hire a Realtor with Short Sale Experience
- The buyer’s Realtor will need to stay on top of where the transaction is at all times, especially if the lender has already filed for foreclosure on the seller. The last thing the buyer needs is to have a contract on a property that moves along to a foreclosure auction without them knowing. A real estate agent with experience dealing with short sales will expedite your transaction and keep you informed of the process.
About the Author: Tiffany Brewington is an Illinois Licensed Realtor and foreclosure specialist with Chicagoland Residential Realty. Contact her here.
Posted On: January 2012
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