Writing an offer on a short sale

If you are buying a home in Marin County, it is fairly common to find yourself writing an offer on a short sale these days.  You may find yourself writing lots of offers.  The process is not for the weak at heart or the impatient.   What you need to know:

What is a short sale? If a home is being sold for below what the current seller owes on the property and the seller does not have other funds to make up the difference at closing, the sale is considered a short sale.

What is an auction sale? After a property owner has been been given a NOD (Notice of Default) a sale date will be set by the lender.  The property will be sold at the court-house steps.  If no one purchases the property at the auction, the property is then owned by the bank and it’s t typically listed for sale through a REALTOR.  Buying property at auction can be a risky process as, you are purchasing that property with any outstanding liens. After a property owner has been been given a NOD (Notice of Default) the lender will file a NOTS (notice of trustee sale) & a sale date will be set by the lender.  The property will be sold at the court-house steps.

How is it different than a foreclosure? A foreclosure is when the seller’s lender has taken back title of the home and is selling it directly.  Often times it’s referred to as a REO sale, which means the bank owns the property. A short sale often occurs when a homeowner attempts to sell the property to avoid foreclosure.

If you are going to write an offer on a Marin County short sale, you need to:

  • Be patient! First you must come to agreement with the seller to buy the home.  The seller’s lender (or lenders, if there is more than one mortgage) then has to approve the sale before you can close. When there is only one mortgage, lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.  Time frames can vary widely based on the lender(s).  Homes with multiple loans on the property are much more difficult to get approved through the short sale process.
  • Get your financing in order. Get preapproved.
  • Be flexible. Lenders like no-contingency offers and flexible closing terms.
  • Don’t give up your right to have inspections.  Homes that are in a short sale position may have deferred maintenance.  It can be difficult to negotiate repairs with a lender.  Keep this in mind when you write your offer.
  • Short sales are becoming much more common in the Marin real estate market.  If you are hiring an agent, make sure to hire someone with short sale experience to help guide you through the process.  An experienced agent will help you research records before you write an offer, aid in the inspection process and follow up regularly with the lender to make sure the process is moving along smooothly.  Short sales require a significant time investment for you and your agent, make sure you choose one willing to do the leg work.