A short sale transaction is VERY different from the a “usual” home buying process. It involves more time to wait, and more leg work for your Real Estate Agent. Due to the rise of short sale properties on the market, training companies see it as an opportunity to train agents specifically in this area, giving them certification upon completion. Although it’s a plus to have your agent be trained in short sales, it’s better that they have actual experience doing the work that goes behind a Short Sale, Especially in NJ. Here are some pointers on short sales. Focus on the qualities you should seek when hiring an agent for this type of transaction.
What is a short sale?
A short sale is when Real Estate is sold for less than its unsettled mortgage. The value of the properties put up for a short sale has usually dropped by 20% or more. Ex. The Mortgage owed is $500,000, and the new Market Value is $400,000.
How does a short sale work? Let us Explain it to you.
How to Find the Best Agent for a Short Sale will Explain it all to you!
If a homeowner is in financial strife and there is not enough equity in the home to pay off the mortgage after paying for the costs of sale, they may consider a short sale. A short sale allows homeowners to avoid incurring a bad record of foreclosure on their credit rating. To do so, they must present documents that support their claim of inability to pay off their remaining mortgage balance to their lender. These documents are subject to the approval of the lender before the house can officially be put up for sale.
A prospective buyer will have to make an offer to the seller, and also to the lender, and wait for their short sale approval letter.
As a home buyer, what are the advantages and disadvantages of buying a short sale?
- It’s cheaper than the usual house prices in the market – The last thing that the bank/lender and the homeowner want is for the house to remain for too long on the market, so they price it low to attract buyers.
- Less competition with fellow buyers – Most buyers are not prepared to wait, and since the process of buying a short sale can take time, this trims down the number of prospective buyers that can make an offer on the property.
- The process is long – Processing the escrow is a long haul, and the approval of your offer is passed on from the seller to the lender.
- You may need to pay costs that are not included in the selling price – Included in these costs are the closing costs, which the lender will not agree to split. There may be additional costs as well.
- You buy the house as is – Contrary to the norm of buying a property and asking for a decrease in price based on necessary repairs, price reductions for a short sale will usually be declined. Importantly, you may counteract this by including contingencies on home damage and repair on your purchase contract.
- You may need to pay part of the agent’s commission – It’s the lender who calls the shots on commissions for the agents in a short sale transaction. They typically pay more to the seller’s agent. Buyer’s agents know this is the case, and may request a higher commission be included in the buyer’s brokerage agreement.
What agent qualities should I look for when deciding to buy a short sale home?
- They Have handled short sales before – Most Importantly, an agent who’s not only handled but closed a short sale. If they’ve closed a handful, that would be even more ideal because. What this means is they know the necessary (and tedious!) legwork short sale transactions require. They could also acquaint you with lawyers to aid you in the negotiation process with the banks.
- Ability to explain the whole process of a short sale to you in a comprehensible manner – Have them explain to you all the legwork and necessary measures involved in a short sale transaction. That way, you are able to prepare what needs to be done, and ascertain whether they have enough knowledge to handle the transaction.
- They’ve a trained eye for spotting red flags – An agent with a good amount of experience in short sales can easily detect if there are possible legal or tax consequences. Once they spot something fishy in the transaction, they can direct you to consult with your hired attorney on how to address the issue.
- They are knowledgeable on lenders and banks –The lengthy part of the short sale process is really at the bank. The agent will need to call for regular updates. Also, an agent who has closed a lot of short sales will know how the lenders/banks fare in the process. This can shorten the process significantly. There would be no guessing game on your side of the equation. Your agent would already know how to strategize in order to expedite the process and make it as smooth as possible.
How to Find the Best Agent for a Short Sale, give Us a Call Today! We have literally been through Hundreds of Short Sale Transactions. Finally and most importantly, it is better than foreclosure!