Buyer Short Sale Tips: Preparing Yourself For Purchase

Short sales are a part of West Hawaii’s real estate inventory, and appear to be for the near future. There are a few ways you can prepare yourself before making an offer on a short sale that will improve your chances of securing that property.

Be financially prepared

Make sure you have spoken with your lender, know exactly what loan you are qualified for along with what documents and financial information you are going to need to qualify for that loan.

Your lender will be able to discuss what you can expect payments to be, the amount of down payment (if necessary) and exactly what price point your finances support.

You can request a pre-approval letter be issued to you, or you can wait until you have found the specific short sale property you intend to make an offer on. The seller’s lender will require a pre-approval letter to accompany your offer before they review it.

You want to be able to make a strong offer that you know can work for you financially. Valuable time is lost when people decide they like a short sale property, wait a few days to talk to their lender, see if they can get a loan, etc, etc. Meanwhile, that well priced short sale property you were interested in, is now under contract with another buyer, and also has an accepted back up offer.  I cannot stress enough how important this is. 

A large amount of cash on hand or earnest money down is not a necessity. When making an offer, a deposit of some kind is usually made as an act of  “good faith” by the buyer. This amount is individual to each transaction. There is no set norm, or minimum/maximum. Keep in mind, the larger the earnest money deposit, the more serious and vested the buyer seems,  however, you have no guarantee the short sale will be approved by the seller’s lender. You don’t want to unnecessarily over extend yourself. 

The more prepared you can be with your financing, the better.  

Don’t Make A Lowball Offer On the Property

The lender will have a good idea from multiple sources, as to what the relative value of the property is.  

The seller’s lender who will be approving the sale of the property will already have completed or will soon order a broker’s price opinion (BPO) on the property. This is a current market analysis provided by a licensed Realtor that gives the lender an opinion of value.

Along with that broker’s price opinion in some cases there may have already been an appraisal completed on the property by the lender.

In these buyer competitive times, you want to put your best offer forward, first. Making an outrageous offer, vastly different from what market conditions reflect is not to your benefit. 

The seller won’t accept your offer, another buyer will get the property, and you’ll continue looking. Be realistic. Make sure you have recent sale information for the neighborhood along with similar sale comparables to give you an idea of where a good offer point is. Your Realtor will be able to supply you with all of these facts.

On the chance that the seller does accept the below market value offer you have made, that contract will have to be approved by their lender.  After spending your valuable time waiting weeks or months for a short sale response, your original offer will almost certainly be countered at a higher price.  

 Patience is key

Short sales take time.

Once the purchase contract, seller financials and other necessary documents  are provided to the seller’s lender, the file is reviewed by the negotiator, loss mitigation department and investor(s) for approval.  These are all different steps in the process and accordingly, they take time.

If something is incorrect in the seller’s documents, or a document needs to be amended, re-signed or clarified the negotiator can put a delay on the file. This stops everything until the problem is addressed. Resending, refaxing, and resigning documents multiple times are things that do occur.  Banks have been overwhelmed with short sales, and they have struggled with to keep up with the volume.

On a positive note we are seeing much quicker short sale approval times. The key in all of this however, is the seller and their financial situation.

As a short sale buyer it is very important to know that the seller has their short sale packet ready to submit to their lender. You don’t want to be waiting for weeks as documents slowly trickle into the listing agent before everything heads off to the lender for sale approval. Before you write an offer have your Realtor inquire with the listing agent as to the seller’s short sale preparedness.  What you want to hear is  “seller has all their documents ready, we are just waiting for an offer to submit to the bank”.

As you wait for approval make sure your Realtor checks in periodically with the listing agent for updates as to where your are in the approval process.

While you can find value in short sale properties, make sure you don’t limit yourself in your property searches. There are traditional sellers on the market right now who realize they are in competition with short sale offerings and have priced themselves accordingly. Don’t get caught in the “I’m only getting a deal if I buy a short sale” mindset!

There is great opportunity in West Hawaii’s real estate market, let me help you find it!

Buyer Property Tips – Asking The Right Questions

When previewing property in West Hawaii remember you aren’t just looking at the home, condo or land, you are gathering valuable information. The quality of the information you gather will prove itself to be very helpful, when you are ready to make an offer. Simple questions you ask can save you thousands of dollars when it comes to the negotiating process!

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Often times listing agents of the subject property host the viewings. You will arrive with your buyer’s agent, and the listing agent will give you a tour of the property. On this tour you will have the opportunity to:

Ask pointed questions

Why are the current owners selling?

Moving off island? Job loss?  Illness in the family? Just testing the market? You will get valuable information into the sellers motivation, and how quickly the property needs to be sold. This simple question can speak volumes. Let the listing agent talk, as you listen and take notes.

How did you arrive at the current list price?

Each property is unique, with each seller having different motivations. You will at times run into a seller that is holding out hope for that one buyer that is willing to pay much higher than market value, believe me, I’ve run into them myself!

Realtors provide their clients with facts and figures, market statistics that illustrate where the market is and at what price the sellers are most likely to sell their property. Once presented, sellers embrace this information, or take into consideration and position their property differently. The listing agent will have provided this information, and if the property is $50,000-$75,000 overpriced, will have a hard time keeping a straight face.    What he or she will be able to do is provide neighborhood information, and give you the reasoning/facts as to their current price.

At the conclusion of the showing make sure you and your buyer’s agent discuss what the listing agent has relayed. Compare notes and fact check with your agent on what was presented in the showing.

Remember, you aren’t just looking or previewing, you are gathering valuable information on that property, and on that specific seller. Information that you can put in your buyer’s tool kit, that will help YOU when it is time to write-up an offer!

I’m off to show property in beautiful West Hawaii, stay tuned for more buyer property tips!