Have a short sale question or need clarification on any response in the FAQ? Send those questions to firstname.lastname@example.org and I’ll answer them.
How can I get an advantage over other bidders on a short sale?
Offer more money than everyone else. At the end of the day, the bank only cares about money. And, ask for as little as you can. Offer cash. Someone getting a conventional loan will have a slight advantage over someone getting a FHA loan or rural housing assistance.
Ideally, you want your offer to be the first offer submitted to the bank. So, being quick to put in your offer is key. But, check with the realtor about how they intend to proceed to know for sure.
On a short sale does the bank only look at the first offer submitted?
It depends on how the selling realtor is running his short sale and the preferences of the bank. Standard practice has realtors submitting the first offer to the bank. If everything goes well with the first offer, that’s the only offer the bank will see. More often than not, the first offer drops out at some point. The bank then comes back and asks everyone for their highest and best offer.
Being the first offer submitted to the realtor will most always give you an advantage. Having an aggressive realtor who can get you to see homes the first day out on the market is key.
On a short sale, what is a reasonable offer?
Even on short sales, the bank wants to get as close to market value as they can. More and more realtors are pricing their short sale properties on the low side to attract more offers. So, the list price may be way off from the price the bank will accept. I saw one property listed at $155,000 and the bank came back wanting at least $190,000. And, they were asking people to come in at their highest and best. Most likely, someone was going to be bidding more than $190,000 on that house.
If there’s no offers on the house, feel free to bid low if the realtor submits the first offer they receive to the bank. If the realtor is collecting offers or if they are submitting every offer they receive going low might not be great
In a multiple offer situation, you really do need to pull up a list of homes which have sold in the area. (With all offers you make, pulling up a list of homes which have sold in the area is important.) Then, use that as the starting point to your offer. Decide how badly you want to get into the house. Even if you do win the offer, there’s plenty of ways to bail and lots of people do bail. So, if you don’t win, hang in there especially if you like the house. Maybe down the road, your offer could be the only offer remaining and you could end up with a super deal.
Tell me more about a bank approved price on a short-sale.
An offer has gone from start to finish with the bank and the bank has come back with a bank approved price on the property. Most likely, the original person putting in the offer has decided to move on to another home. This is the best possible deal to get involved.
The time it takes to go from start to finish on a short sale with a bank approved price, is just slightly longer than a “standard bank owned deal.” There’s no more negotiations which need to be done by the bank. If a person is getting a loan, expect about 30 days plus a few days for the bank to review documents. Every bank does things differently so make sure to ask the selling realtor plenty of questions.
Should I be worried about there being two lien holders on a short sale property?
Yes and No.
No. If the primary and secondary lien holders are on the same page with what they want to accept than it’s possible this kind of deal will go well.
Yes. When there’s two lien holders on a short sale property it can be tricky. The primary lien hold may have rules which will only give the secondary lien hold a certain amount of cash from the deal. The secondary lien hold may not appreciate getting a low amount of money back from their loan. This can create a problem with getting this type of deal done. The secondary lien hold may want the seller to come to the table with cash or agree to make a note to pay the secondary lien an amount of money back over time.
Asking the selling realtor the status of the lien holders before getting involved in the property is important to avoid stress down the road.
How can I walk away from a short sale deal–especially as a cash buyer?
Walking away from a short sale is extremely easy. In the short sale addendum for Utah, it’s clear that any party can walk away from a short sale at any time. When an offer is finally accepted there’s a few ways to walk away: The due diligence deadline, The appraisal deadline, and finally the financing deadline. Take a close look at your offer to find the your deadlines and watch those carefully. It doesn’t really matter if a buyer is a cash buyer or if they are getting a FHA Loan. The ways to walk away from a deal are the same. Just make sure to ask the sellers if they have their own cancellation form or if they’ll let you use a standard form provided on the MLS.
What is a reasonable amount of earnest money on a short sale?
On a short sale, the earnest money you put down on your offer isn’t as significant as other kinds of transactions. In Utah, you can choose to have the realtor deposit the earnest money 4 days after bank acceptance. That allows investors to put offers on multiple short sale homes without actually having to come up with the earnest money in cash. And, that bank acceptance could take months.
When the bank is evaluating an offer, the most important thing to the bank is their net from the deal. The earnest money certainty is important but not something to really stress about. A lot of people like to put down 1 percent of the purchase price as their earnest money. But, at the very least for deals under $200,000 going with about $500 to $1000 should be good enough. The bank won’t accept or decline an offer based on the earnest money. But, they will decline an offer if the net to the bank is lower than another offer.