6 Tips for Buying a Home in a Short Sale

I have been asked many times about short sale by my buyer-clients.  Having been on both sides of the short sale transaction, I found that the understanding a short sale home purchase process is critical.  This article is brief and not into too much detail, but a good start for those who are interested in purchasing a short sale home.

  • By: G. M. Filisko

    Published: March 19, 2010

    By preparing for a real estate short sale, you can emerge with a great home at a favorable price.

    1. Get help from a short sale expert
    A real estate agent experienced in short sales can identify which homes are being offered as short sales, help you determine a purchase price, and advise you on what to include in your offer to make the lender view it favorably. Ask agents how many buyers they’ve represented in short sales and, of those, how many successfully closed the transaction.

    2. Build a team
    Ask agents to recommend real estate attorneys knowledgeable in short sales and title experts. A title officer can do a title search to identify all the liens attached to a property you’re interested in. Because each lienholder must consent to a short sale, a property with multiple liens, like first and second mortgages, mechanic’s and condominium liens, or homeowners association liens, will be harder to purchase.

    A title search may cost $250 to $300 up front, but it can help weed out less desirable properties requiring multiple approvals.

    3. Know the home’s fair market value
    By agreeing to a short sale, lenders are consenting to lose money on the loan they made to the sellers to purchase the home. Their goal is to keep those losses as low as possible. If your offer is dramatically less than the home’s fair market value, it may be rejected. Your agent can help you identify the price that’s good for you. The lender will determine whether approval is in its best interest.

    4. Expect delays
    There are two stages to a short sale. First, the sellers must consent to your purchase offer. Then they must submit it to their lender, along with documentation to convince the lender to agree to the sale.

    The lender approval process can take weeks or months, even longer if the lender counteroffers. Expect bigger delays if several lienholders are involved; each can make a counteroffer or reject your offer.

    5. Firm up your financing
    Lenders will weigh your ability to close the transaction. If you’re preapproved for a mortgage, have a large downpayment, and can close at any time, they’ll consider your offer stronger than that of a buyer whose financing is less secure.

    6. Avoid contingencies
    If you must sell your current home before you can close on the short-sale property, or you need to close by a firm deadline, your offer may present too many moving parts for a lender to approve it.

    Also, consider ordering an inspection so you’re fully informed about the home. Keep in mind that lenders are unlikely to approve an offer seeking repairs or credits for such work. You’ll probably have to purchase the home “as is,” which means in its present condition.

    This article includes general information about tax laws and consequences, but isn’t intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

    G.M. Filisko is an attorney and award-winning writer who luckily has avoided the need for a short sale on her properties. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics. Link to Original Article

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Housing Market Condition Update – Jan 2013

The whole Northern Virginia area (including Alexandria City, Arlington County, Fairfax City, Fairfax County, Falls Church City) has improved very positively. There have been 971 houses sold in the last month, which is an increase of 7.65% from December 2012. The median sold price also goes up 11.85% to $425,000 and the average sold price 9.39% to $499,412 compared to last month. It took less to sell as well. The average days on market is only 58 days which is 1/4 less time than last month.

According to this report, housing inventory in Northern Virginia area has around 1000 houses for sale less than last year. This means the supply scale is really unbalanced with the demand of housing due to the fact that employment number has gone up in this market.

All Realtors reported multiple offers in almost every reasonable listing. If you decide to visit new development neighborhood, then please expect a wait since builder’s sales offices are swamped as well.

RBIntel Report Jan 2013