Buying a Short Sale Home
Buying a short sale home hinges upon the bank's acceptance of the purchase. Getting the bank to approve a short sale can be a lengthy process if the short sale has not been pre-approved by the bank.
Offers on buying a short sale home in Florida are made using the Florida Association of Realtor (FAR's) Residential Sale and Purchase Contract and FAR's Short Sale Addendum to Purchase and Sale Contract form.
The addendum stipulates that the time periods for inspections, contingencies, deposits and other obligations under the contract commence from the date the seller delivers written notice to the buyer that the contract has been approved by the lender. In a normal sale the contract is based on the "effective date" of the contract which is the last date the contract is signed by both parties.
Some other things to know about buying a short sale home that has not been pre-approved is:
1. When you make an offer the bank is generally unaware of the purchase price and comparable sales. This is one of the factors that extends the process. In many cases they ask for a BPO - Broker Price Opinion. A tool used by banks to value properties instead of going through the expense of an appraisal.
2. If the seller has more than one mortgage on the property, it becomes a lot more difficult to approve the short sale as the the seller needs the approval of both lenders. Mortgages are recorded in the county records. Click here for Sarasota's County Records.
3. Short sales are handled by the lender's loss mitigation department. Due to the backlog of transactions lenders take a very long time to get back to you. It can be very frustrating.
4. Very low offers do not generally get a response. Check other prices in the neighborhood before submitting your offer. Short sales that get approved is when the price is close to market value.
5. House repairs are seldom done.Homes in most instances sell "As Is". If there are improvements that need to be made on a home they may be some kind of credit negotiated but the buyer is responsible for the repairs.
6. When you get approval, short sales must close on time, exceptions are rare. Where as in a normal sale closing extensions are not uncommon. This means buyers have to be prepared to act quickly to get their loan approved and inspections done once the short sale is approved.
Buying a short sales can be a great opportunity but go into it knowing the factors and with the awareness that your short sale might not be approved.
Read more about buying a short sale home.
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