Sunday, April 5, 2009

Ask Erin: I made an offer on a short sale. How long will I have to wait for the lender to accept my offer?

I was shopping at Target this evening, and one of my buyer clients called me while I was eyeing some really neat new tupperware.

About four weeks ago, we made an offer on the home of their dreams...a great home in Rocklin. The listing agent does lots of short sales, and the two lenders involved (there is a first and a second mortgage) are both I have closed Sacramento short sales with in the past. I have had numerous conversations with my clients about timelines, expectations, the process, etc. Their offer is in "first position" - meaning, it was "cleanly" written (straightforward terms), and it is the "highest and best" offer (short sale lender considers their offer the best combination of offered price and terms). They are extremely excited about this house, and have taken several steps to make sure that as soon as lender approval is issued they can jump ASAP (downpayment funds are ready, they have provided ALL documentation to their lender, made arrangements for renting their house that they do not need to sell in order to purchase this one) all we need is approval, right?

RIGHT! As a buyer of a short sale, you really have little influence or control over what happens. My advice to you, if you have made an offer on a short sale?
  • Offer a realistic price - determine this offered price with your Realtor. Asking price on short sales often times does not reflect what the short sale lender is willing to accept, nor does it necessarily reflect the property's market value. Often times this price is artificially low, to attract lots of attention.
  • Make sure that you write a straightforward offer. Do not ask for exotic terms in your offer. Write your offer with relatively short contingency time periods - these time periods generally begin once the lender delivers written acceptance of the short sale. Acknowledge and expect to take the property in its current condition. Be sure to have your agent use form SSA, the Short Sale Addendum, with your offer.
  • Try to inspect the property thoroughly while the lender is analyzing the file. This does not necessarily mean that you should pay for a full-blown home inspection (unless you want to), but keeping in mind you will be purchasing the property "as-is" make sure you are comfortable with the condition of the house. Ask the seller to provide you with any reports or disclosures available.
  • Make sure your Realtor checks in regularly with the listing agent. Ask for updates regarding the steps the lender is taking to analyze the file. It is very important that the listing agent knows that your offer is still on the table. In the world of short sales, offers come and go frequently.
  • Get your lending squared away. Provide any and all documentation required by your lender to process your financing. The short sale lender(s) may not give you a full 30 days to close your escrow.
  • Expect to "hurry up and wait." Unfortunately, depending on many variables, short sale approvals can take anywhere from 2 weeks to 6 months, and everything in between. Those are normal timelines.

Good luck...try not to get too impatient.

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