As mentioned in a previous post, a short sale occurs when an individual is unable to pay their mortgage in full when selling the home. Instead of a “full payoff,” it’s a “short payoff,” also called a short sale. Most real estate agents are aware that short sales are much different from traditional sales in listing and working the entire deal. I’d like to provide a few important points to be aware of before the property is actually listed. These can help tailor expectations for potential buyers and keep the deal running smoothly to closing.
- Make sure the listing notes that the property will be an “as-is” conveyance. Most sellers are not in the position to spend money on repairs and the short sale lender most likely will not approve any type of repair costs on the final settlement statement. Buyers should be prepared to cover any repairs after closing.
- With the understanding of #1 above, buyers should understand that the home inspection is for informational purposes only. The buyer typically can still release and/or terminate (within the appropriate amount of time) if the home inspection is not satisfactory. However, as noted above, the buyer should not expect the seller to repair the home. With that said, sometimes it’s better to do the home inspection earlier if the buyer is willing to front that cost with the understanding that all parties are still waiting on lender approval. Conducting the home inspection early would allow the buyer to save time if they didn’t want to move forward. It would also allow the seller to relist the property sooner rather than later.
- All terms of a potential contract are subject to lender approval, including but not limited to: agent commissions, closing cost assistance, termite inspection, admin fees, etc. Most lenders do approve 6% commissions, but not every lender. Closing cost assistance up to 3% is approved most of the time. Termite inspections are approved sometimes. ***Important note – a lot of these numbers depend the strength of the buyer’s offer. A lower offer may create tighter margins for the lender, thereby forcing the lender to cut or reduce certain items. Nothing is guaranteed in a short sale.
- The seller, listing agent, or settlement company will not pay for any items not covered by the short sale lender. The buyer should be expected to cover any necessary items. This is identical to bank-owned situations where a buyer is purchasing directly from HUD or VA or similar.
- Make mention if the short sale is being professionally negotiated by our firm or another company in the area. Contact an attorney at Hanger Law about our firm negotiating the short sale. It helps all parties involved (especially the seller and listing agent) and will keep the process moving forward expeditiously. Selling agents and buyers also tend to view this more favorably.
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