Are you interested in buying a short sale in Cape Coral, but aren’t sure how? We all know of someone that has been involved with this type of sale and maybe had a nightmare transaction. Good news; the more you understand this process the easier it may be to easily navigate through it.
What is your time frame? How long do you have to wait for an answer?
Most short sales on average, take about 30-60 days to receive any kind of answer from the bank. A short sale is definitely not a quick solution if you lack patience or need to secure housing by a deadline. Many consumers are leery; they know or knew someone that had a nightmare experience. The short sale may have taken 6 months or more to close; if ever. That is certainly not the norm, but it can happen.
The next thing to consider: Choosing a Real Estate Agent
A knowledgeable agent is certainly the first step in a successful short sale process. Ask questions like “have you helped a buyer purchase a short sale before?” If so, ‘how did the process go?” Then ask, “Have you ever negotiated a short sale for a seller before?” and if so, “how did that process go?” Watch for the agents’ opinion of short sales. If an agent has had a bad experience with a short sale you’ll be able to pick up on that. If they feel like they are a waste of time you’ll notice that too. Then you need to find someone who understands the process and can help you through it.
Next: View the homes
When you are viewing the homes take special note of the condition of the property. Is the property occupied or vacant? Are there tenants living there? If so, when will their lease expire? Has the home been maintained? Has it been destroyed? Keep in mind that short sales are written on an AS-IS contract; that means the seller will not pay for repairs to the property. What you see is what you get. The AS-IS contract will be discussed in more detail later.
Ready to Submit an Offer: Make sure it is written up correctly
There is a basic method to making short sales as streamline as possible with regards to the buyer’s agent. Your agent should of course called the listing agent to determine the status of the short sale. Does the seller plan to accept 1 offer or many? Have any offers already been submitted? If so, what was the outcome? Was there a previous bank approval? What were those terms? Does the seller plan to sign an offer and then take the property off of the market or do they intend to keep it available for sale?
Your offer will consist of the following:
Far/Bar As-Is Contract: This is an approved as-is contract. It does not require for the seller to be responsible for any repairs. It does give the buyer the right to an inspection. If you are not comfortable with the inspection results you can opt out of the contract with no penalty.
Short Sale Addendum: This form outlines timeframes. You can give any number of days for the seller to obtain bank approval, as we discussed the average is 30-60 days. You can make the offer’s effective date good from the time of acceptance by the seller or from the time of receipt of written approval from the bank. It is often advised that you wait for written approval as to not lose money with inspections not knowing the outcome of your offer.
Approval letter if financing: This is a letter from your lender approving your financing.
Proof of Funds if paying with cash: This can be a letter from your bank stating “Mrs. Buyer has adequate funds available to close on said property for $this much money” or it can be a copy of a bank statement.
Earnest Deposit: Typically at least $1,000. The seller’s lender will want proof of this so go ahead and have it ready. It shouldn’t matter who is holding the escrow but if the seller is already working with a specific local title company it is best to have it placed there.
This often gets tricky for buyers to understand. The seller(not the bank) owns the property and must sign the offer before the bank will begin to process the file for approval. The seller should not take more than a couple days to sign. Keep in mind; the seller is only agreeing to sell the property if the lender agrees to a short sale.
Then you: WAIT for seller’s lender’s approval
Determine how often you’ll get updates. Do you want to know what is going on every week? Only when there is progress? Do you want to be called? Emailed? Communication is key. You and your agent should have a plan. Keep in mind that you and your agent are at the mercy of the seller’s agent. Your agent cannot call the bank for updates; he/she will only get the information from the seller’s agent.
Great News: Approval
Now your effective date starts. This means that your inspection period starts, your loan approval period starts. Make sure you work diligently on your financing because asking for an extension can be a real headache.
At Closing: One extra form
Most banks are now requiring the buyer to sign an affidavit of arms length transaction. This ensures that nothing funny is going on. Some banks are even doing background checks on buyers to verify this as well. Otherwise your closing will be handled like any other real estate closing.
Good Luck, happy buying… Check out the homes in Cape Coral for sale now that are short sales: