Tips for a successful short sale
For sellers, short sales may be the only way to avoid foreclosure if they owe more on their house than it is worth. Unfortunately, some buyers may avoid short sales altogether, regardless of the home itself; short sales often have the reputation of being difficult, taking months to close, or falling through altogether.
Whether you’re trying to sell your home in a short sale, or are a buyer interested in a short sale property, there are a number of ways to ensure the transaction is successful. The following tips can help make a short sale successful and leave the buyer and seller – and the lender – happy at the end of the process.
– Find an agent experienced in short sales
While many agents advertise experience in short sales, this many only amount to a handful of transactions. Before hiring an agent, ask them how many short sales they have successfully closed; likewise, ask if they have taken courses in short sales or selling distressed properties. This additional experience can help the short sale process go more smoothly.
– Make sure the buyers are committed
The name “short sale” can be deceiving as escrow on these properties can often stretch for weeks – if not months. Finding buyers who are committed to a property throughout the process can avoid pulling out after making an offer. Because of the length of escrow, ensure buyers do not need to urgently relocate or be in the home by a specific date. Likewise, some agents may even ask for a commitment in writing that the buyers will not put in other offers while waiting for approval.
– Target sales with a single lender
Short sales with more than one lender are often less likely to close. This is because multiple lenders may wind up squabbling over the sale amount; the primary lender will want every cent they can get, often only authorizing a few thousand dollars to the secondary lender. The second lender, therefore, may feel that they would get more in foreclosure and not approve an offer.
– Keep buyers engaged
Because the escrow process can stretch for a long period of time, ensure that buyers stay engaged and in the loop with what is happening. Update the buyers any time there is an update in the status of the sale; if time passes with no progress, a weekly check-in can help keep them engaged.
– Prepare for a short closing
Escrow during a short sale can last for months, but once an offer is accepted by the lender, things can move incredibly fast; many lenders request closing within 10-20 days. To avoid delaying a process or needing to request a short sale extension, buyers may be encouraged to order an appraisal or begin processing the loan in advance. While this can be risky, it helps keep the sale from falling though.
While short sales do carry risk, they can benefit both buyers and sellers. By following these tips you can help the short sale process go smoothly and get the most out of the transaction.