April 5, 2009
April 5, 2009
Portland Metropolitan Association of Realtors —Distressed properties are up for sale in the Portland metropolitan area more than they have been in the past, and while buyers may be tempted by potential bargain prices, they may also not be familiar with all that is entailed in these complex transactions. The Portland Metropolitan Association of Realtors® has compiled some tips, below, to help buyers who are considering a short sale.
A short sale is a home that is being sold for below what the seller owes on the property, and the seller does not have funds to make up the difference at closing. This is different from a foreclosure, in which the bank owns the property. Buyers may be a good candidate for this transaction if they are:
• Patient In a regular real estate transaction, buyers negotiate with the seller to have their offer accepted. In a short sale transaction, one extra step is added—the bank that owns the mortgage has to approve the offer as well. This process may take several months. “Banks are loathe to respond to offers until the last minute. They insist upon keeping the properties on the market until just before the foreclosure is final. The underlying lien holder may have hundreds of short sale files to wade through,” noted broker Don McCredie of Realty Trust Group, Inc.
• Organized If buyers can make a cash offer, so much the better. But, if they can’t, it is important to show that they are preapproved for a loan and will be ready to close at any time. This also means that if their offer is contingent upon the sale of their own home, their offer may not be looked at as favorably by the lender. Buyers embarking upon a short sale purchase should note the following potential obstacles to closing the transaction:
• Multiple liens: Ask a title officer to check to see if there are multiple liens on the property (such as a second mortgage, construction lien, or tax judgment). As McCredie advises, “There could be numerous underlying lien holders with different degrees of motivation. The first mortgage may be in favor of selling short, but the second or third lien holders could balk at the prospect of taking less.”
• Rejection: The lender will be looking to minimize their loss on the property. Be aware that the offer may be rejected at the last minute if a better offer comes along. “There is no guarantee the holder of the loan will agree to sell the property at the listed price. Many offers may be received, often exceeding the advertised price,” said PMAR President Gary Majors,
• Take it or leave it: Because the lender is already taking a loss on the property, buyers may be asked to take the property “as-is” with no repairs or repair credits. Only the consumer can decide if the money that may be saved on a short sale purchase is worth the potential risk. PMAR urges buyers not to take on this type of purchase without expert advice to guide you. Majors agrees: “If you decide to pursue a property in a short sale situation, don’t go it alone. A Realtor® can help you navigate the search, sales agreement, and financing process, and also help balance the decision to wait for a response or find another property.”
# # # PMAR, the voice of real estate in the Portland metropolitan area, is Oregon’s largest local Realtor® association. Representing more than 6,500 professionals involved in all aspects of the real estate industry, PMAR is committed to protecting and promoting homeownership, establishing and maintaining high professional standards of practice and creating unity in the profession.
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