Are you or someone you know in danger of losing a home due to foreclosure in the Pearland area?  Are you thinking of buying a home that is listed as a short sale in the Pearland area?

If a home is being sold at an amount below what the current owner owes on the property and the seller does not have the money to make up the difference at the closing, the sale is considered a "short sale".  Today, many more home owners are finding themselves in this situation due to many factors, such as job losses, aggressive borrowing against their home, illness, needing to move and loss of value (can't sell). 

A short sale is different from a foreclosure in that the owner still "owns" the property, not the bank or lender.  There are pitfalls for buyers and sellers.  This article is not intended to be advice...I'm not an attorney...but it may help you understand the process. 

Be patient - It may take days to get an answer back from the bank on whether your offer is accepted or not.  Even after you have verbal acceptance, it may take days, weeks, and in extreme cases, several months to get a signed contract.  I know that sounds odd, but it has happened.  Most of the time, it takes several weeks to get the contract back.  If there are two loans on the property, this could add additional time as each lender has to approve the sale.

Make sure your financing is in order.  Do not expect a lender to take your offer if you are not pre approved.  Lenders today want to prequalify you, but you should push for a true pre approval.  Otherwise, your offer may not even be considered.

No contingencies - If your purchase is contingent on the sale of your current home, the lender will probably not accept your offer unless you are under contract and the buyer has their "clear to close".  In this case, you should expect to get temporary housing until the sale goes through.  There is no way to time a short sale with your housing requirements.  If you have specific needs, a short sale is probably not your best option.

Contract language - The lender will most likely require verbiage in the contract that the sale is conditioned upon final acceptance by the lender. 

Real estate agent - If your real estate agent has not participated in a short sale before, you may want to consider using an agent that is familiar with the process.  It is frustrating even when you know what to expect and understand all the technicalities.  Aunt Minerva the real estate agent may not be a good choice on this purchase...or sale.

Title Work - If you are purchasing, you will probably want to make sure the title work has been started and that the agent has already started some dialogue with the lender.  The lender usually requires a preliminary statement from the title company early in the process.  Both lender and title company need to be working hand in hand.

A few more tips:

Do the research on the market value of the home.  If you offer too much below the listed price or fair market value, this could cause the lender to reject your offer.  That said, you should make your offer based on your comfort level.  Just be aware...it may not mean a successful sale.

Lender terms and requirements - Even if a lender approves a short sale, they may require the seller to sign a promissory not to repay the deficient amount of the loan.  If the seller does not sign, this could jeopardize the sale as well.  Also, a lender can change the terms of the contract that you have already negotiated and signed and this may not be acceptable to you.

No repairs - Most likely the lender won't and the seller may not be able to make repairs.

Closing costs - Most lenders will not pay any costs normally associated with the buyer.  However, some lenders will pay a nominal amount, such as 1%. 

Short sales can be tricky and obviously not for those who do not have time to wait.  But if you have the time, patience, and the wherewithal to see it through, a short sale can be a win-win for the buyers and sellers....and even the lender as short sales end up costing the lender less in most cases.

As always, we are here to help with any of your real estate needs!

Kathye Warfield
Pearland Real Estate
281-485-1946