Before we get into how to buy a short sale property in Bryan College Station, TX let’s take a look at what a short sale is. A short sale can be compared to a foreclosure home, but they are not the same. When a home is available at a short sale, the bank or the mortgage lender will agree to allow the current homeowner to sell the house for less than what they owe. In order for a home to be considered a short sale, two things need to happen:
- The homeowner is extremely behind on payments and won’t be able to catch up
- The housing market is suffering and has significantly gone down so that the house is worth less than the remaining balance on the mortgage
In most cases, the lender and the homeowner would prefer to go through with a short sale process in order to avoid a complete foreclosure.
A common misconception when it comes to short sale homes is that many people believe the lender would like to get rid of the home as fast as possible and move quickly in order to get as much money back as possible. The truth is that banks and lenders will take their time in order to recover their losses as best they can – just because a property is listed as a short sale doesn’t mean that the lender will accept your offer, even if the seller agrees to your price and terms. Although potential buyers will negotiate with the homeowner throughout the short sale process, all of the details must be reviewed and approved by the lender in order for the sale to go through. This is what makes the process so unpredictable and lengthy – everything has to be approved by the lender even if the homeowner and buyer agree on their own terms.
Before you get excited about the opportunity to buy a home below market value you need to pick up the phone and call your real estate agent. Your agent will be able to look into the property and research the details behind the short sale that they can then share with you. Here is a quick breakdown of the process that takes place during a short sale transaction:
- The homeowner initiates a conversation with their real estate agent and lender about the possibility of selling the property via short sale. The owner will have to prove to the lender that they can no longer make payments towards the mortgage and that they have no assets to sell that would help them catch up on the payments.
- The agent and homeowner list the property for sale, and eventually put together and execute a sales contract with the interested buyer. Remember that even if a contract is executed this does not mean that the sale will make it to the finish line – the lender has to approve the price and terms.
- The lender will review the sales agreement and either approve the offer, reject the offer, reject the offer but outline what they would agree to or simply choose not to respond at all.
- Once the lender responds to the sales agreement it’s back to the buyer to either accept or reject the new terms outlined by the lender. If the contract is approved, then the sale will continue and eventually close, and the home will be transferred over to the new owner. The lender will receive the proceeds from the sale and release the original homeowner from their mortgage loan, even if the full balance was not paid off by the sale of the property.
If you are considering buying a short sale property in Bryan or College Station, here is a more in-depth outline of what you can expect throughout the process:
- The first step is to find the property that you are interested in. Whether you come across a short sale while you’re looking for homes for sale or if you are specifically searching for these types of opportunities, you should not be doing it on your own. Working with a qualified and experienced agent can make all the difference between a smooth transaction and a difficult and frustrating experience. An agent will check the title, find out whether a foreclosure notice has been filed, determine how much is owed to the lender and gather additional information to help you put together a competitive offer. Our team at Brazos County Realty has more than 25 years of experience in the real estate industry and will gladly offer up our knowledge and expertise to guide you through any real estate transaction – no matter how complicated it may be!
- Unless you are planning on paying for a short sale home with cash, you will still need to go through the steps of getting approved for a mortgage. If you don’t have financing secured, then the lender will most likely dismiss your offer and you’ll miss out on the home. Getting pre-approved is a relatively quick and easy process – most lenders can verify your credit and financial information within a day or two. Once you submit the paperwork and you get pre-approved the lender will write you a letter that you can use to make a credible offer on a home.
- When you are ready to make an offer on a short sale home you need to make sure that it is competitive – your real estate agent will be there to guide you and help you put this together. A good offer on a short sale home includes:
- The purchase agreement that will be signed by you and the seller
- The earnest money deposit to show that you are a serious buyer
- The pre-approval letter from your lender, unless you are paying all cash
- A comps package for similar properties in the area to show that your offer is strong
- Proof of funds showing that you have enough money to purchase the home and make mortgage payments if you are getting a loan
Putting together a low offer will not work in your favor – remember that everything has to be approved by the lender that holds the mortgage on the home even if the seller accepts your offer. Underpricing is the number one reason that banks will reject offers on short sale homes.
- Make sure that you and your agent put a list of contingencies together – these are conditions that must be met before the sale closes. For example, state how long you are willing to wait for short sale approval, the amount you will pay in closing costs, how many days you need to complete a home inspection, etc.
- Keep in mind that short sale homes are sold “as is.” Unlike in a regular real estate transaction, in a short sale you can’t ask for credits from the seller or for them to lower the price if you uncover issues that will be expensive to repair. This doesn’t mean that you shouldn’t get a home inspection, you should always get a thorough inspection from an experienced inspector because this may uncover deal-breaker problems that may change your mind about going through with the sale.
- Short sales usually take longer to close than a traditional sale – you can expect an average of 60 to 90 days for a lender to approve the terms of your offer. There are so many variables that can happen during this process that can extend the time it takes to complete the transaction. This is why it is important to work with an agent who is experienced in short sales so they can manage your expectations and guide you through the process.
- There are various issues that can come up during a short sale, but some of the most common ones include:
- The bank will accept a competing offer
- The seller backs out of the deal
- The seller owes multiple debts to different lenders, and the junior lender (smaller debt) will block the sale
Finding a short sale home can be difficult to begin with and the process of purchasing it is also lengthy and unpredictable. Despite these challenges, if you make it to the finish line then you know that you got a great house at an incredible price. If you are interested in learning more about short sale properties or are in need of a real estate professional to guide you through a short sale, please contact us.