Seven Quick Points For Buyers Of Real Estate Short Sales In Denver, Colorado

 

Posted by Damon L. Chavez on Wednesday, June 22nd, 2011 at 1:23pm.

1)  Across the United States and in the Denver, Colorado metro area, short sales of Residential Real Estate are very common. The majority of homebuyers are not aware of the differences between buying a short sale home and purchasing other homes on the market.   The term “short sale” describes the situation where the homeowner owes more on their home than it is worth (is “upside down” on the mortgage) and now, for whatever reasons, has to sell instead of going through a foreclosure.  And they have negotiated with their mortgage company to accept a sales price and mortgage payoff that is less than the amount owed.  Home owners get upside down because after they purchased, refinanced, or took out a second mortgage, the home’s market value decreased to an amount lower than the loan(s) on the home.  And/or the property was valued too high in the first place.     2)  A bank would allow a short sale and take less than what is owed because it’s faster, less expensive, and less risky than doing a foreclosure.  The foreclosure process takes months for a mortgage lender to do and then they end up owning the property and selling it at auction or on the regular market.  The short sale process allows the lending institution to get a certain price without having to take on property ownership responsibilities, liabilities and expenses.  Also, the lender does not have to go through the time, expense and uncertainty of selling in today’s market.        3)  A buyer of a short sale should be prepared for a sales process that is longer than most residential property sales.  This is because that while the buyer is negotiating with the seller, the seller is negotiating with the lending institution and they are navigating the laws, rules, and policies that apply to short sales and foreclosures.  Because this is not a simple procedure, a homebuyer who needs to be in their new home by a certain date should take this into account.   4)  The buyer’s benefits of purchasing a short sale property are that they are likely to be getting a home that is priced under market value.  Also, because the owner is still in the property, the home may be in better condition than a foreclosure which could have been vacant for a long time.   5)  Some other considerations in the short sale market are that inexperienced listing agents might price a short sale property unrealistically low simply to get offers and start the short sale process on that particular property.  For example, if the property is one where the short seller has obtained their mortgage through the Veteran’s Administration (a VA Loan), the transaction cannot be put into the VA’s short sale process until there is an offer.  In this scenario, what could happen is that the VA lender is not willing to accept an offer that low and the buyer would have to respond with a higher offer or leave this potential purchase transaction alone.   Other short sale cases – unless it is an FHA Short Sale – are cumbersome as the seller and listing agent agree upon a listing price.  Then the potential buyer enters into the picture with an offer and the parties go to the bank with a short sale offer and start the process.  Often times the bank responds with an offer that is much higher and the buyer is put off by the higher offer.  It’s just the awkward nature of the present system.   6)  There are many third party companies that specialize in marketing short sale properties.  As in any other business, some are good and some are not.  A professional acquaintance of mine had such a company disappear on him in the middle of a transaction where he was their listing agent.  Once that happened, he no longer had access to information about the property and both the potential buyer and his agent wasted time and were very disgruntled.   To avoid that type of experience or any of the other different aspects of buying a short sale property, a helpful and knowledgeable buyer’s agent will explain the process and very responsibly guide his clients through the process of buying a short sale.     7)  Due to the details of buying short sale properties, Colorado has instituted a Short Sale Addendum to the Colorado Real Estate Contract. Both buyers and sellers can exit the transaction for any reason.  For example, buyers may be able to exit if they can’t wait for the transaction to complete.  Sellers may be able to exit if the bank decides to hold them responsible for the deficiency (the difference between the potential sales proceeds and the actual loan amount).     Since short sales are worth pursuing because of the value and potential instant equity, please consider all of the above when pursuing a short sale deal.  Be patient, and try to have a back up plan for any move-in deadlines or other contingencies.  And, work with a short sale trained or experienced buyer’s agent who knows the areas where you want to buy your next home.  Now is the time to take advantage of interest rates and the many short sale values available.   Please call or email with any questions.     Warm Regards, Phil Heep www.YourAgentPhil.com 303-588-6885