Because they are often priced below comparable homes in the Westfield area, bargain thirsty buyers find short sales particularly alluring though they can often prove to be deceiving.
If a listing is not officially designated as “Short Sale Approved”, there is simply no way of knowing for certain if a offer made on a short sale would be accepted. Merely advertising a home as a short sale does not imply the bank has agreed to consider a short sale offer. The listing agent and the seller are simply wagering the bank will be desperate enough to accept such an offer.
Not uncommonly, agents will list a Westfield home as a potential short sale and price the home attractively low. However, a short sale list price may not equal (or even come close to) the minimum amount a bank may be willing to accept.
Ultimately, it could well be that the seller will fail to qualify for a short sale opportunity. A seller who asks for debt forgiveness and has assets, and is unwilling be work out a repayment plan with the bank, will have to prove hardship. The bank will request documentation of their current finances along with a letter explaining why they can not afford to continue making mortgage payments. The seller will need to adequately plead their case. Simply looking to avoid foreclosure is not an acceptable reason for a lender to accept a short sale.
Before approving a short sale, the bank will conduct an appraisal to determine the market value of the home. They might also request a market analysis by a realtor instead of a full appraisal. A market analysis measures the home’s value by examining the comparative sale prices of three recently sold homes in the neighborhood. This process is usually quicker and less costly for the bank and is common with short sales.
In the event the offer price is significantly lower than the appraisal, a bank will be less likely to accept the offer for the sale of the home. It is the bank’s discretion whether or not to accept the terms of the offer.
A bank will typically weigh the cost to sell, cost to hold and foreclosure costs when making a decision to sell a home.
Before making an offer on a short sale, buyers need to ensure they are fully prequalified. Because they are often less costly than other homes, competition among buyers is often fierce, and banks will require strict proof of funds or a pre commitment (rather than a typical preapproval) letter at the time the offer is made. Bidding wars on short sales are also not uncommon, with lenders sometimes unwilling to consider anything but cash offers.
Waiting for the lender to accept or reject a short sale can be agonizing. It can often take a month or more for the lending company to even respond to an offer, placing buyers and sellers in a frustrating state of limbo. Many buyers walk away from short sales because they simply can t endure the waiting and red tape that’s involved. Unlike regular real estate sales, lending companies often don t even respond with a counter offer. They simply reject the sale, leaving both the seller and the buyer feeling confused and disappointed..
Because the short sale process is often fraught with difficulty, many buyers simply don t feel it s worth their time considering them. For those who can bear the waiting, however, short sales can provide buyers with a great deal on a home, and a positive solution for sellers.
Author Resource:
Peter Jordan is a realtor in Westfield New Jersey committed to helping and informing first-time home buyers and sellers. For more information visit http://www.livinginwestfieldnj.com
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