Short sales represent a chance to purchase a home at an often greatly reduced price in today’s real estate market.
What is a Short Sale?
A property is said to be ‘underwater’ when the price for which it can be sold (market value) is less than the amount owed to the bank holding the mortgage: In today’s real estate market, this type of situation is often the case, due to the fact that prices of homes have dropped significantly. Many banks, when faced with properties such as these in their mortgage portfolios, will agree to work with the home owner and allow a short sale – selling the property for less than the outstanding amount of the mortgage. To foreclose on the loan costs the bank money in legal fees and extended periods of time before actually gaining legal title to the property. Additionally, once the bank owns the property, it must secure it from intruders, physically maintain the structure, pay taxes and insurance premiums as they become due, and market it for resale; all of which is costly and requires designated man power. A short sale keeps the owner in the property while it is being advertised for sale, circumventing many of the added responsibilities the bank must assume if it chooses to foreclose.
Short Sale Offers – whom will the Buyers be dealing with?
When deciding to make an offer on a home subject to short sale provisions, there are several things to be aware of. A real estate listing will state that it is subject to a short sale and/or third party (usually meaning the bank which holds the mortgage) approval. The translation for this is that even if the owners of the property choose to accept an offer from a potential buyer, the third party (bank) must ultimately agree to that same offer before the house can be sold. Caveat – just getting an Offer to Purchase signed by all the selling parties needed to make the offer legal can take a long time. What that length of time might be, depends on the bank involved. Some mortgage holders have designated departments and employees who are ready to act and expedite the short sale. But most banks don’t appear to have such infrastructure, and buyers should be prepared to have to wait for extended periods of time before an Offer to Purchase is signed. Furthermore, many banks won’t even sign an Offer to Purchase, but will indicate that an offer is acceptable and then proceed to the Purchase and Sale Agreement.
Short Sale Purchase and Sale Agreements – Not for the Faint of Heart
In a conventional (non short sale) real estate transaction, the Offer to Purchase is signed by all parties and then is superseded by the Purchase and Sale Agreement, a significantly more detailed document, stating the rights and legal obligations of all partires involved. Normally by the time this document is ready for signatures, a home inspection has been accomplished, to reveal any defects in the property; these defects have been negotiated between buyers and sellers, and the final results are incorporated into the Purchase and Sale Agreement.
For more information on short sales, see the advice of: www.bestlondonlawyers.co.uk