Tuesday, December 23, 2008

Short Sale Secrets

There are NO secrets to buying a short sale home in the San Fernando Valley if you work with a professional real estate agent. However, if you intend to confront home-owners who are in mortgage default or pre-foreclosure without professional representation, the losses can add up.

In fact, the process can be smooth and risk-free if you know how to eliminate the risks involved. I'm going to outline the greatest risks and what you should do to protect yourself.

Seller Says, "YES! It's Yours!"
The truth is, the seller can say whatever they want and accept your offer. But if the current owner owes more than the home is worth, the seller does NOT have the final word if the deal will be approved. The lender(s) will make that determination after they have reviewed the short sale package and have performed their own appraisal and have paid another agent to perform a Broker Price Opinion (B.P.O).

How to protect yourself here: Keep in mind that the home is not yours until all the lenders have agreed in writing.

Months & Months
The greatest risk is waiting for months to find out if the home is yours. This is usually the case when a home is listed on the market as a short sale and the agent is still waiting for any offer to come-in so he can package the deal and submit for approval to the lenders. Keep in mind some agent will send any deal just to get the lenders bottom line for approval. During this time, more offers will made on the home because the home will still be advertised in the MLS system as agents are reluctant to pull the home as SOLD even when they have an accepted agreement between buyer and seller. Why? Because the chance of the original buyer falling through is great because some buyers get tired of waiting for the bank to approve the short sale and having other offers as back-up will help sell the home.

How to protect yourself: Don't place any money in escrow until the deal has been approved by all lien-holders on title. This will allow you to write offers on other short sale homes giving you the chance to purchase another home which may already be closer to getting approved.

Bottom line, be sure you are working with a short sale specialist. There are so many twists and turns buying a short sale home is that if you don't work with someone who knows what they are doing, you can risk losing the home and the initial deposit you place in escrow.

To search for short sale homes in the San Fernando Valley, click here.

Written by: Richard Johnston, Rodeo Realty
Short Sale Specialist and Bank Owned Specialist

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