Today’s real estate market is seductive. People look at the ads or listen to the news and consider buying a property because prices have dropped so drastically. However, having ample funds to purchase real estate property is just one factor to think about before entering the real estate short sale world. This article shares insight learned during the process of purchasing a short sale real estate property in 2009-2010 in Florida.
Review these steps before you sign:
Step 1–Determine if you are serious about purchasing a short sale real estate property.
—Are you looking for an unbelievable deal in real estate? Or maybe a second house for a real estate investment?
—Do you have the energy to manage and take care of two real estate properties?
Step 2-Take a good look at your finances. Make sure you (and your partner) know how much money you have to invest in real estate and whether you can comfortably own two real estate properties at the same time. Have you thoroughly reviewed your funds? Do you and your partner agree now is a good time to pursue the purchase of short sale real estate?
Step 3–Review your local newspaper’s short sale real estate offerings. Saturdays and Sundays are usually the best days to look for real estate in the newspaper. Mark the homes/condos designated as short sales that peak your interest. Keep the newspaper handy. Discuss your short sale options with your partner.
Step 4-Do a drive-by of the short sale real estate properties you like. Note the location of the real estate in relation to grocery shopping, schools, malls, and convenience/gas stores. How do the areas look? Many short sale properties are not in good condition and need time, effort, and dollars invested to get back to their original conditions.
Step 5-Have a clear idea of the area(s) of town where you would like to purchase a short sale real estate property. Also, know the locales you wish to avoid.
Step 6–Use the internet to research realtors in your area. Look for realtors who have received recognition/awards and worked in the area for 15+ years. If realtors left their biography webpages blank or stated something like, “let me sell you your next house,” skip them. A serious, polished realtor will have a professional, well-developed web presence.
Step 7-Before you meet with the realtor, decide on your approach. Sometimes revealing too much too early to your realtor is not a good idea. Decide with your partner how much you want to disclose to a realtor early in the process. Consider negotiating a lower commission rate with the realtor, given the current state of the real estate market. If you work out a reduced rate, get it in writing from the realtor right away so there are no problems later.
Step 8-Do not allow the realtor to tell you what you will/won’t offer for a short sale real estate property. Your bid is up to you and your partner. Also, if you are going to counterbid, discuss this issue alone before making final decisions. Of course, these matters will eventually be discussed with your realtor. Just be sure you know what you want and won’t be swayed by the realtor unless a factual argument is presented.
Step 9-Before you sign, obtain all information regarding pending loans against the short sale property. What is the total owed on the real estate property? Find out as much about the seller as possible with your realtor’s help. Google the seller(s)’ complete name(s). Which banking institutions are holding the mortgage(s) of the short sale property? How long has the real estate property been for sale? Has it sold and fallen through in the past? Why did the short sale fall through? Insist on gathering as much information as possible.
Step 10-Be prepared for a very long wait. Some buyers have waited for 4 to 6 months JUST for a yes or no answer on whether a short sale contract offer was accepted by the seller and banking institutions holding the real estate property. You may not hear back from anyone with a solid answer for several weeks or months. If you cannot sit tight and go on with your life while you are waiting for responses from the realtor and banking institutions involved, do not pursue a short sale purchase.
Once the waiting is over, you will have more decisions to make. Many banking institutions will counterbid and try to increase the cost of the real estate property. Or they may refuse to negotiate at all. In some cases, so many levels of individuals exist through which communication passes, it can take several weeks for answers to brief questions.
Author’s Personal Experience of Purchasing Short Sale Real Estate
In this writer’s short sale purchasing experience, several “levels” of people (through which information passed) were involved in a complicated real estate sale:
- This writer and her spouse communicated with their realtor.
- Their realtor communicated with the local realtor who listed the property.
- The listing realtor communicated with the realtor across the country who represented the seller.
- The realtor across the country was the “immediate” realtor for one of the banking institutions holding a mortgage on the property.
- One of the banking institutions holding one of the mortgages hired a “negotiator” to negotiate with the “immediate” realtor living near the seller (not near the property).
- Although it can’t be confirmed for this author’s purchase, three random sellers of short sale properties have indicated they were shut out of all negotiations to sell their properties as those banks refused to communicate with mortgagees behind on payments. Thus, it’s possible the seller (of this writer’s purchase) was also omitted from this chain of communication.
- “Special” realtors hired by the banking institution(s) to do cost studies of the real estate property’s “true” current value communicated only with the banking institution(s).
In essence, the banks hold all the cards and will not respond to phone calls, letters, or emails from anyone. Everyone involved is shut out of the process at the banking institution’s whim. It’s feasible that many potential buyers simply give up because they can’t tolerate the waiting and disregard of their wishes. In fact, in this case, the writer and her spouse were later told there had been another buyer “in line” with a contract on the short sale property (the author was hoping to buy) waiting to be reviewed by bankers. These buyers got so frustrated with the waiting process that they simply dropped out when their short sale contract expired, rather than sign contract extensions to await the bank’s reply.
Because this writer and spouse were willing to wait and stood to get a great real estate property for a fantastic price, they ultimately signed 4 contract extensions. After many weeks of “negotiation” through the chain of people described above, a closing date was set by the bank. The writer and spouse had no choice at all in the matter. Unlike more traditional real estate property sales in Florida, the buyers had no input in the closing title company selection or the date of closing.
If you follow the steps above and maintain patience, you just might get the short sale real estate property you seek at a great price. Ultimately, this writer and her husband were successful in closing on the short sale real estate property they wanted. It was a long, winding road that was well worth the journey.