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What You Should Know About Buying a Clovis Short Sale
July 14th, 2009
What You Should Know About Buying a Clovis Short Sale
If you’re in the market to buy a new Clovis home, you probably noticed something different lately. More and more homes for sale are listed as “short sales.” A few years ago, it was extremely rare to ever see a Clovis short sale. Now they’re everywhere. This article overviews what you need to know about the short sale process.
What Is a Short Sale?
A short sale is when the property’s value is less than what the owner owes their lender. Although many homes are currently down in value, a short sale may only occur when the owner can prove some kind of extenuating circumstance that has negatively affected their financial situation (e.g., they lost their job).
When analyzing short sale eligibility, the value of the property, the cost of foreclosure, and the owner’s financial condition are taken into account by the lender. Sellers must submit a hardship letter explaining why they can no longer afford the property, along with bank statements, and a financial worksheet noting all income and expenses. It’s a lot of work but worth it if the seller can no longer make their payments.
Should You Buy a Clovis Short Sale Property?
There a pros and cons to buying a short sale. It’s true that often times they are priced less than a non-short sale home and in many cases you can pay less than market value. However, short sales require a tremendous amount of patience from all parties involved in the transaction. For example, a seller can accept your offer, but their lender must approve the sales price. This takes time. Lender approval requires having the property appraised and the entire process can take anywhere from several weeks to several months.
If you’re renting, buying a foreclosure is a bit of a risk. For example, if your lease is up in 1-2 months, you likely want to avoid short sales. Currently short sales simply take too long to process for most renters and while you’re waiting to hear back from the bank, your lease is expiring. In fact, you (the buyer) have no say in when the closing will occur. The property will close only once the lender approves the sale.
Other problems can occur. For example, Wells Fargo Home Mortgage estimates that the total short sale process takes approximately 37 business days. Typically, short sale approval is good for 30 days. But if the closing fails to take place within the 30 days (or given time frame), the entire process may need to start over.
This is not meant to discourage from buying a short sale, but merely to let you know that it’s a complicated and sometimes frustrating process. Fortunately, help is on the way to alleviate some of these problems (see, Clovis Short Sale Primer).
What Does My Real Estate Agent Have to Do and Know?
If you plan on buying a Clovis short sale or foreclosure, you’ll want a patient and diligent Realtor. Your agent will need to provide the listing agent with as much information as possible when you make the offer. For example, you’ll want to include a pre-approval from your lender for this specific address (or proof of funds if it is a cash offer). What’s the big deal? Anytime there’s information missing from the package to be sent to the bank, days or weeks could be added to the transaction’s timeline.
Who Will Communicate with You?
Your real estate agent will communicate directly with you just like s/he does in any other real estate transaction. Hopefully the seller will have a good listing agent who should be in touch with your agent on a regular basis. Unfortunately, this rarely happens. Often times the seller’s agent doesn’t have any new information to share and they are just as anxious to hear from the bank as you are.
How Much Should You Offer?
Your real estate agent can help you determine FMV (fair market value), i.e., what the home is worth. If there are multiple offers on the property then present your highest and best offer. There may not be an opportunity to counteroffer, so go in strong at the beginning. If you’re not comfortable with that, then move on to the next home where there’s not multiple offers. Keep in mind though that there often will be multiple offers on the lowest priced homes. Everyone wants a bargain.
Find an Experienced Team
Whether you are selling a home and short sale is your only option, or you are considering buying a Clovis short sale property, we can help. Contact us today and we’ll explain your options.
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