Ready to tear out their hair, many agents and buyers have declared, “I don’t want to look at another short sale!” Like a game of poker, I always look at it as a game of strategies. You just have to know who you are playing with and what their next move is. When you know what to expect, this will help you to negotiate the best deal.
While the seller accepts an offer on a short sale, their short sale bank has to review and approve the price and terms of the offer because, ultimately, the bank will be taking the biggest loss. Each bank handles negotiations differently, but I have found some patterns that make it easier to negotiate. These items need to be considered when making an offer so that there are no surprises, only negotiations:
1. First and foremost, Buyers must understand that short sales take longer than the traditional sale. While the banks have improved on their time frames, they still require anywhere from 2-6 months on average to review the seller’s financial records and the offer. See Short Sale--An Oxymoron--A Word for Wait.
2. Normally the offer has to be reasonable within 10-15% of the comparable properties in the area. The bank will have an appraisal to compare the offer to.
3. Depending on the type of loan the buyer has and the price offered, some banks may pay for termite inspection and work, repairs, and closing costs. A lot of banks tend to be more flexible with VA and FHA buyers.
4. Most short sale banks will not pay towards Homeowner Association (HOA) Dues in the rear. If the seller can, they should continue to pay their HOA dues. The mounting fees seem to be a real source of contention for short sale banks or buyers to accept. The buyer’s first reaction is “why should I pay” for something the seller should have kept up. But if buyer can get the bank to pay closing costs or reduce the price in exchange and looks at it as part of the cost of buying a nice home at a great price, it is easier to accept.
5. Depending on the Bank, they may also ask the buyer to pay for the HOA documents which range anywhere from $200 to $500. Again it is best to look at it as part of the cost for a nice home.
6. Most banks won’t pay for the Buyer’s home warranty. So no need to ask.
7. Normally, the oven/stove will be sold with the home; however, the seller will often want to sell any other appliances separately outside escrow.
8. If the seller has two loans on the home, the first lien holder offers the second lien holder money to release their interest. Depending on the situation, a second lien holder may ask for more money than the first lien holder is willing to give. It may seem that you are in a stalemate. Without the second lien holders' cooperation, the sale cannot happen. While the seller cannot contribute any more money, and the banks cannot ask the buyer to contribute. If it is a great house, rather than let it go, the buyers may offer to contribute to the cause.
Short Sales definitely have a longer bumpier ride with less frills than a traditional sale normally does. However, with the help of a knowledgeable short sale specialist, one who understands the game and with these ace strategies you may be able buy a great home at a lower price. The long ride and some added cost may be well worth it.
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