Buying A Denver Short Sale
Short sales have become increasingly popular and many buyers or real estate investors are eager to jump in headfirst without any research. Buying pre-foreclosures is a lengthy process that requires a lot more detail than most buyers may think. It is wise to contact a Denver Realtor and have them communicate with the financial institution or lender who has the home on the market and ask if it is indeed a short sale and the precise information on the foreclosure. Just because a Denver home may be priced low, in a decent neighborhood, does not mean there is not a catch. Many buyers do not realize that most often a foreclosure may take longer than 30 days to close and repairs may have to be made before a closing can even begin.
What is a Short Sale
A short sale is when a Denver homeowner's lender accepts a lesser price for the release of a mortgage. This is helpful for homes that are in danger of being foreclosed on. It gives the seller an option to save their credit and payoff their mortgage. If a seller accepts a buyers offer, keep in mind, it does mean that the lender will actually accept it.
If a seller is up-to-date on their mortgage, but the value has dropped considerably, the lender may still consider the option of a short sale. A seller does not have to be in default of mortgage payments just to meet the requirement of a Denver short sale. If a seller ends up owning more than the home is worth, the lender may help to lessen the price to the current market value, but no less.
Check the Public Records
Research is perhaps the most important piece of advice when it comes to investing in a Denver short sale. It is extremely important to research the history of the home before making an offer. A Denver real estate agent will help to find out whom the lender is and if the home has a foreclosure notice already and exactly how much is owed to the current lender. This is key in buying a short sale because it will help the buyer have an idea on the offering price.
Buyers need to understand the complications that could occur when investing in a short sale with a second loan; a Denver Realtor can help the buyer to learn this information. The first mortgage is always protected by the second. This is the case always, except if the second lender decides they are not interested in foreclosing. The first mortgage loan will have to offer something to the second mortgage, in order to make up for any loss. This sometimes can be a grueling process and may not be worth the time and effort.
Hire a Denver Agent with Short Sale Experience
Hiring a Denver real estate agent that is specifically trained in foreclosures and short sales is a wise move. If a buyer hires a run-of-the-mill Denver real estate agent, who only specializes in home sales and not foreclosures, they could be in for a tough time.
Making sure all of the information is understood and completed is very important in any sale, but when dealing with a short sale, buyers must complete numerous amounts of documentation. Finding a Denver Realtor who is an expert in short sales will help the buyer to reach deadlines and help them to understand every detail of the purchase.
Prepare the Seller for Lender Demands
The seller must understand in detail the demands that they must meet from the lender. A lender will not in any way permit a short sale if the seller has equity or is unable to pay the difference of the existing loan and the sale price. A seller must provide the lender with a hardship letter, informing them of the downfall that put them in the current financial position. Sellers must also understand that they may owe taxes on the amount of debt that is pardoned.
Keep in mind that many sellers may want to do a deal under the table in order to pursue their short sale. This is fraud and buyers will be prosecuted for this. Sellers do not make money off of any kind on a short sale, no matter what the situation may be. Denver real estate agents can help a buyer understand the legal process.
Submit Documentation & Purchase Offer to Lender
Once the buyer has decided on an offer amount for their new Denver real estate, and the seller approves it, the buyer will need to send the offer to the lender for approval. The lender will also need a copy of the buyer's earnest money deposit. The lender may ask the buyer to increase this amount.
Being pre-approved is the best approach to take when purchasing any type of property and lenders will check to see if the buyers are pre-approved in a short sale almost immediately. Sending a pre-approval letter along with the buyers offer is a great way to gain the lenders attention. If an agent sends the lender comparables, this will help them understand the reason for the buyers offer amount.
Give the Lender a Deadline
Do not allow an unforeseen amount of time to pass after sending an offer in to the lender. Send the lender a letter with the offer stating a time line in which the buyer expects an answer. This will help in that the lender will pay more attention to the offer and give a chance for the buyer to cancel if they need to.
Submitting an offer to someone who can make the decision on his or her own is the best move to make. If a lender has to have committee approval, it normally may take two to three weeks. Make sure to get the correct name and phone number of the department and person who handles the short sales. Sending the offer in to the wrong department can leave room for someone else's offer to go through before the offer submitted makes it way to the correct department.
Expect Commission Negotiations
If the seller agrees to pay a commission, it is still the lenders final decision to decide the amount that will be paid. The lender is not paying the seller any money for the short sale; therefore they will have to pay the commission. More than likely the commission amount will be decided by the lender who in turn reports the amount to the listing broker and on to the buyer's agent. Most often the commission is negotiated
Signing a buyer's broker agreement with the Denver real estate agent, may help if the buyer can waive the difference that may be due. Many brokers feel it is unfair to castigate the Denver Realtor, but the lender is the one making the decisions.
Reserve the Right to Conduct Inspections
Normally, during a Denver short sale, the lender will not pay for any home protection or termite inspections. The lender will ask that the buyer purchase the property as-is. This means the buyer must obtain the property with no repairs made.
A home inspection is very important before closing. Buyers should inspect every aspect of the home in order to understand clearly the investment they are about to make. Making the buyers purchase contingent on the repairs that will have to be made is a must.
