Short Sales in the Real Estate Market: Are They Worth It?

sales in real estate

With the real estate market in near shambles, it is reported that one in about 145 homes are in foreclosure. There is a step before foreclosure termed a “short sale”. If you are a buyer looking to get a good deal on a house this may be an option for you.

What is a short sale?

 

In basic terms a short sale is a pre-foreclosure. It means that the owner of the home cannot pay their mortgage any longer but typically is up to date on payments, or has just fallen behind. A short sale is an agreement the bank (who holds the mortgage) makes with the homeowner to sell the house for less than the homeowner owes on it, with the opportunity to pay the bank back a percentage of their loss. Someone is coming up “short”, thus the term.

 

Pros:

 

Since the bank and the homeowner want sell, a buyer can typically pay thousands less than they would in a traditional sale. This is the biggest pro for someone looking to potentially save thousands of dollars.

 

Cons:

 

There are many negatives involved in a short sale for the buyer. Firstly, the term “short” makes it seem as though the deal will go through quickly. This is not the case. Short sales can take months to close, because there is third party approval from the bank required and a lot of back and forth. Also, there are many addendums to the contract in a short sale. The biggest and most troublesome is that in a short sale, the bank will write the contract to state that they can still accept offers even after they accept yours. This means, you can be packing up your things getting excited to close on your new home and the bank can call a day before closing telling you the deal is off. Typically there is no home warranty and the home is sold in “as in” condition.

 

Things to remember:

 

If you do choose to consider short sale properties in your home search, there are a few things to consider. Ask you real estate agent to amend the contract to state that the bank cannot accept other offers after yours is accepted.

 

Be prepared for a counter offer because the bank will not want to let the house go at a low price, so bid low but not too long to be rejected completely.

Also, be prepared for a lengthy process. A short sale can take anywhere from 4-8 weeks for an offer to even be accepted, and this is before closing and underwriting.

 

Short sales have many negatives, but if you are a patient person who wants to save several thousands of dollars on your new home it may be worth a try. Tread carefully though, and if you can afford it, a real estate attorney can be your best friend. Happy house hunting!

How to Inspect Your Own Real Estate Property

Inspect property

Inspecting your own real estate is not a hard thing to do, but be aware that professional inspectors will often catch more than you will. However, a basic inspection of a property is something that any owner can do. If your property is an improved property (a property that has a building on it, rather than raw land) then you would start your inspection outside. Look around the base of the building for normal wear and tear. While you are looking at that, search for signs of insect infestation. This may take the form of termites, carpenter ants, beetles, and any number of other insect species. The best way to look for termites and carpenter ants is the sign of rotting wood. That wood may not be rotten after all, but a feast for a termite or carpenter ant colony. If you cannot see any insects and there are small holes in the wood that looks rotted, then chances are you have an infestation. If the wood looks rotten but without holes, it may be in need of a simple replacement. Often, a rotted piece will have a moist feel and a discoloration to it where an infested piece will have a dry feel with a grayish color, or no discoloration at all.

While you are outside, grab a pair of binoculars and take a look at your roof. Using binoculars will eliminate the need to walk on your roof and increases your safety. If you see an irregularity in the roof, such as roof tile that is not aligned with the others, or a bump in the roofline, then call some roofers for an estimate of what the problem is and their prices. Never call just one but at least three, and make sure they offer free estimates. Some roofers will charge for an estimate.

 

Make sure that all exterior plumbing is not leaking and that your soffit is intact. The soffit is that part of your roof that hangs over your walls. Pieces of the soffit that are missing or damaged will be an invitation for infestation by insects or rodents into your attic.

 

Moving inside, use a flashlight to take a good look at your window frames as they intersect with your walls. Look for signs of water damage or rotted wood. Also, check the drywall with your fingers to make sure it is dry. Wet drywall is not only a contradiction in words, but useless as drywall turns into putty when wet.

 

As you checked your plumbing outside, check it inside. Use your hand to check the pipes under the sinks to see if they are dry. Check your shower and bath fixtures to see if they are working properly.

 

As an addition, check your electrical outlets to see if they are in working order. You can purchase an electrical testing unit at a hardware store for about ten dollars, and it is perfectly safe to check those outlets. As always, use caution when check electrical plugs, and call a qualified electrician to fix anything that seems out of the ordinary.

 

Other items that you should routinely check are large kitchen appliances, exterior door locks, garage doors (if applicable) and window locks.

 

Doing a routine check of these items can save you money by catching a minor problem before it becomes a major problem.

How You Can Evaluate Lowball Real Estate Offers

Evaluate Offers

Might I begin with, an offer is an offer! I would not look my nose down at any offer. I have worked through enough offers in my life to value the importance of each and every one of them. Keep in mind how important it is to actually sell the property that you have for sale. There are two types of lowball offers. Let’s explore the first one, the “are you kidding me” offer. Right from the start I will tell you that there are people in this world with the nerve to place a $100k offer on a house that is listed for $300k. That said, should this happen to you simply decline their offer but always give them something back. For instance in our example, they offer their $100k and your counter offer at $299k. This sends a clear signal to the potential buyer that you are not stupid and that there is no house here to be stolen away. Many times with gaps this large, that buyer will just go away and that’s what they need to do. Please do yourself a favor and do not allow this type of lowball offer discourage you from continuing to sell your property.

The second type of lowball offer is just a game of ball! When I receive an offer, I appreciate its value even if it is lower than I really wanted it to be. Do you know why? Because the buyer is, in a sense, playing ball with you. And one participant on the playing field is better than none.

 

First, I would look at the amount of this offer. Then, I would check for their proposed date to close the deal, contingencies like mortgage, pest inspection and home inspections, too. Lastly, I would review the offer for any extras they are asking me for, like that old light fixture that belonged to your grandfather.

 

Many times buyers offer low just to see what they can get, it’s just the game. What typically ends up happening is that you meet in the middle. An example of this would be a $300k home and they offer at $280k. Each party ends up moving toward each other at a few thousand dollars at a time until they meet in the middle. With this example, both parties would settle and sign at $290k.

 

Lastly, it is my opinion that all offers should always be handled professionally and with the hope that they will result in the sale of your property.