Important information about Buying a Short Sale - How to make an offer and get it accepted on a Short Sale or Short Pay in California

[Scott Schang]

I want to give you a perspective on buying short sales and short pays that will give you more control of the transaction. Short Sales and Short pays are becoming more and more common in this real estate market and my best guess is that over 70% of what you are finding when you search for homes are either short pay / short sales or foreclosure / REO homes.

The seller and seller's real estate agent are an important part of the short sale process. The number one thing i hear from "agents" is that the bank foreclosed on the home without notice. I understand that there are some banks/lenders that are not cooperative and difficult to work with and I also believe that many times that is a self induced "difficulty" due to a lack of understanding of the process.

Much of the difficulty of the Short Sale / Short Pay process can be avoided with a simple matter of perspective by both home buyers and the Realtors® that represent home buyers.

You can make the process easier by understanding it. Your Realtor should be able to communicate with the seller's agent to determine whether or not they are communicating with the bank/lender.

Here is a "Perfect World" example of how to make an offer on a short sale / short pay and buy your new home.

* The seller's real estate agent has educated the home seller on all of their options. The seller is communicating with the bank and has ensured that the bank will not foreclose on the home during the process. The seller's agent has already prepared and reviewed the seller's hardship package and is confident that the seller is a good candidate to ask for a short pay from the bank.
* Your Realtor® has researched the comparable sales in the area and has recommended a fair offer price that the bank should be willing to accept. You should typically offer between 10% and 15% below current market value to accomodate for any further reduction in values over this (3 month) process.
* Once the offer has been accepted by the seller, open title and escrow and order an appraisal. You know that the bank will order an appraisal or BPO before even considering your offer. Submitting an appraisal with the purchase offer and financing approval to the bank/lender you will make the negotiator's job easier.
* Your Realtor® and the sellers agent are communicating and have a solid game plan on how to get you into this home. They work together to give you the best chance of buying and give the current home owner the best chance of selling their property to result in a Win/Win/Win for all parties involved.

Be willing to make an investment of $350 if you really want this home. Pay for an appraisal. It is the single most pivotal component of your offer to purchase this home for less than what is owed on it. An appraisal is an opportunity to get an independent third party report on the actual market value of the property. Once you have the appraisal, you will know if your offer is too high or too low and you can change it accordingly before submitting the package to the bank.

The Bank/Lender would prefer not to foreclose on a property unless they have determined that it is thier only option. I have seen banks postpone the foreclosure process for up to a year if some arrangement is made to make partial payments on the loan during this process. It is very expensive for a bank to forelcose.

Doing your homework will save you money. By making a fair offer to buy the home, you increase your chances of having the bank pay for closing costs. Many banks/lenders will pay up to 3% of the sales price toward your closing costs if your offer is fair. Make sure your Realtor® also verifies that the current home owner has made arrangements with the bank to prevent the home from going into foreclosure during the offer process.

Getting a good deal on a Short Sale / Short Pay is a matter of you being able to buy the home of your dreams and have a payment that you can comfortably afford. There are no magic deals out there, you can not buy a home at a HUGE discount unless you are an all cash buyer and the home needs a lot of work.

What they don't tell you is that the homes on TV that they buy, fix up, and sell for huge profits are cash purchases. Cash is king in Real Estate and there are incredible deals out there for investors. Investors do not buy short sales / short pays - they buy bank owned homes in poor condition that do not qualify for bank financing.

Now that you know the secret to buying a short sale / short pay home - be patient and find the home of your dreams. Buying a short sale or short pay is a long term commitment. Do your homework. Make sure your Realtor® does thier homework and most importantly - Enjoy the Process!

This is an incredible opportunity for home buyers. If you are armed with a good team going into this market - you will surely be the proud owner of a new home!

I can be reached any time at:

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