Should buyers avoid shortsales?

Some friends of mine asked me this very question as they prepared to put in an offer on a short sale in a nice little neighborhood in Escondido. They, like many other buyers in today's market, had heard the horror stories about short sales. Buyers putting in offers and not hearing back for months, delayed closings, frustration galore!

Sure, short sales can be a little scary, but sometimes they work out just great. We helped a family purchase a short sale in Chula Vista just a few months ago. The home once appraised at close to a million dollars...and they got it for about $650,000. Needless to say, the short sale worked out for them!

So what's the deal with short sales? Some are good, and some are bad...but here are a few tips.
-Is the listing price for the short sale approved by the bank? If so, the process can move much more quickly.
-Always ask the listing agent how long it will take the bank to respond to your offer. Some take weeks and even months...others can respond in just days!
-Is the list price for the home fair? Do your homework. If the list price comps out, chances are the home is priced well and is a pretty good deal. The closer your offer is to the list price, the more quickly the process may go. Sometimes the bank will hold onto the "lowball" offers for months, waiting to see if anything better pops up. If you want to make a "lowball" offer, you probably want to keep looking at other properties.
-Will the home appraise out? If the agreed-upon purchase price is fair, then the home should appraise and you should have no trouble securing financing. But if the home appraises for less than the contract price, you may not be able to get a loan...OR...be responsible for kicking in the extra bucks! or sometimes you will just renegotiate the sales price with the bank. Bottom line...the home needs to be priced fairly!
-If the short sale price is not approved, is there more than one mortgage? If so, is the first and second with two different banks? Sometimes this slows things down. It goes more quickly if both mortgages are with the same bank.
-Sometimes you can get "outbid" by a higher offer, even when you are in escrow.
-Is your financing secured? After waiting for the bank to respond to your offer, once they do, the clock really starts ticking! They expect you to get all your inspections completed and financing in order FAST--often in shorter time frames than normal sales. Be sure you are ready to go!
-Is the listing agent experienced with short sales? Experienced listing agents can speed things along by constantly communicating with the bank.
-Always work with a buyer's agent that is experienced in short sales. This will save you many headaches! Contact us at christinevt@prusd.com for a free consultation.