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Short Sale Education
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Short sales get approved only if buyer’s offer is at or very near fair market value as determined by appraisal or broker price opinion done by seller’s lender. Therefore, short sales are only approved and closed at today’s value.
Either type of bank mitigated sale will still require fair market price from buyer. The benefit to buyer of a short sale vs bank owned property is likely condition of the property and required condition disclosures by the current seller. If a bank owns the property, it may have sat vacant for an extended period of time and the bank does not have to disclose any known or unknown material facts regarding the property. Purchasing a bank owned property is definitely “buyer beware.”
That depends on a number of factors including but not limited to number of mortgages on the property, whether or not there is a Mortgage Insurance Company and/or underlying investor that has to approve the short sale and also the timelines it takes for a specific servicer, MI company, or investor to complete their normal approval process. Each can be different based on their staff available in the short sale department, work load for each employee, and total number of short sales they are working on. Almost all short sale offers are considered on a “first in, first out” basis. That being said, with most servicers today, the average short sale takes 8-12 weeks to get approved once the offer has been submitted to the seller’s lender. To see the step by step short sale approval process (click here).
If your offer is at fair market value and whomever is negotiating the deal for the seller is experienced and knowledgable in their process, you have a better than 90% chance that your short sale will get approved. You just have to be patient and let the process run its course. Stop looking at other properties, you have committed to a binding contract with this seller according to the terms of your purchase agreement.
As the buyer, t is decidedly in your best interests to do the inspection at the time of the purchase agreement and not wait until after the short sale has been approved. The benefits to you are two fold. The obvious benefit is if, as a result of the inspection, you no longer want the property, you aren’t wasting 2-3 months of your time to find out this is not the property for you. The most important benefit to you for doing the inspection at the time of the purchase agreement applies if you still want the house after the known inspection results. It is critical that you know the condition of the property at the time the offer is made so your offered price is based on that known condition. If, as a result of the inspection, you need to lower your offered price, you can do so prior to the offer being submitted to seller's lender. If you wait until after the short sale is approved to have the inspection done, it is too late to adjust the price. The lender willl not allow for price adjustments after the short sale is approved. Have the inspectioncompleted prior to the offer being submitted to seller's lender to determine the value of the property based on its condition and the maximum price you are willing to pay for that property.
Provide the agreed upon earnest money to be deposited at the time the purchase agreement is accepted by the seller. The deposit of earnest money guarantees that you have a binding contract with the seller. If you do, only your offer will be submitted to seller’s lender and that offer stands until it is approved or declined by the seller’s lender or time periods in the purchase agreement run out. Any other offers received by the seller would be considered “back up offers” and would not be submitted to seller’s lender until your offer had run its course. Without deposited earnest money, your contract with the seller may not be binding. Seller could entertain other offers and, if superior to yours, present the better offer to their lender at which time, you would be out of the deal all because you didn’t provide the earnest money at time of the purchase agreement.
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Markve & Zweifel lawyers and attorneys practice in the area of short sale negotiation for the Minneapolis, St. Paul, Maple Grove areas including Bloomington, Brooklyn Park, Anoka, Brainerd, Fridley, Eagan, Shakopee and surrounding areas in Minnesota. This includes short sales in Wisconsin from Hudson to Milwaukee overseen by our attorney licensed in Wisconsin.
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