I WANT TO BUY A SHORT SALE, WHAT SHOULD I LOOK FOR?

Recognizing Short Sales That Banks Will Approve

Buyers, don’t waste your time and/or your money on an Arizona short sale until you do your homework about the seller’s motivation and financial situation and find out whether their Realtor has experience with successful short sale closings.

Just because your seller is upside down on their mortgage, does not mean that the property qualifies for a short sale. If the seller has assets, then their bank will expect the seller to come up with the money to pay towards the mortgage or sign a promissory note at closing. If the Realtor is not an experienced short sale Realtor, he or she won’t understand the process and could waste your time. 

We are certified short sale experts that have handled and closed many short sale transactions in the Phoenix, Scottsdale and surrounding areas of McDowell Mountain Ranch, DC Ranch, Silverleaf, Grayhawk, Desert Ridge, Desert Highlands, Troon, Rio Verde, Dove Valley, Tatum Highlands, Tatum Ranch and the whole Tatum corridor. Our long established relationships with lenders and our experienced negotiators provide us with the right tools to get the results you need.

Qualifying the Seller

While sellers are worried about qualifying their buyers, buyers who are interested in purchasing short sales should be qualifying their sellers. Here are some important signs to look for which increase the odds that the short sale will get approved:

• The seller has no assets or extra cash to come up with to pay towards the mortgage at closing.
• Seller truly has a financial hardship. Loss of job, decrease in wages, divorce, illness, etc.  
• Is there one or two mortgages, Or even more?
• The seller is current on their mortgage payments, but cannot afford to continue making them, or they are only behind a couple months.
• No foreclosure proceedings have been instituted.

Ask the seller’s Realtor or your Realtor the following questions:

• How much did the seller pay for the property?
• How long has the seller owned the home?
• How much do they owe on their mortgage?
• Is there more than one lien holder?
• Is the seller current on their mortgage or in default?
• Have foreclosure proceedings been instituted? If so when?
• Has a foreclosure auction sale been scheduled? If so, when?

This way you can figure out what offer to make or decide to move on to another property.

 

What Can Go Wrong?

There are numerous things that can cause the bank not to approve the short sale such as: 

• Seller refuses to provide the bank with required financial information.
• Second lien holder won’t accept what the first allows them to collect.
• There are other third party lien holders such as unpaid contractors.  
• Mortgage Insurance companies can kill the deal, even if the mortgage companies approve it.
• The seller is in default and has received a foreclosure notice.
• A foreclosure sale is scheduled and upcoming soon.    

If any of the above applies, the short sale may never get approved.

Signs to Look For Increasing Short Sale Approval Chances  

• The seller’s bank has already pre-approved the sale. This means that the process has already been started with another buyer who dropped out.     
• The listing agent has lots of experience closing short sale transactions.
• Foreclosure auction sale is at least 6-8 weeks away. Short sales take awhile to get approved so if there is a foreclosure auction sale scheduled soon, the house could be sold. Although, many lenders today are holding off on foreclosure proceedings while they are negotiating a short sale transaction.

What to Expect?

60% of short sales fall through so don’t spend any money on the home for appraisal, inspections or give any earnest money deposits until your offer is approved by the seller’s bank. Generally, contract contingency dates start running from the time the third party lender approves the transaction, not when the buyer and seller agree to the contract terms.   If you are renting, don’t give your landlord notice until you know for certain in writing that the transaction has been approved by the seller’s bank.

Short sales are good investments because they can be bought a discount prices. However, you need to understand the short sale process and recognize a short sale property that will get approved. By asking questions and obtaining information, you can determine if the property has a chance of being approved or whether you should move on to another opportunity.