Well, ladies and gentlemen, 2011 is here and the Northern Kentucky housing market is still riddled with short sales and foreclosures a-plenty. Though the foreclosures in our NKY market only account for 4-6% of the listings on the market, they account for about 18-22% of the homes that are selling.
Buyers are calling in by the dozens and wanting to see these much talked about good deals on bank owned and distressed properties. However, buyers are finding out that once you find a short sale or foreclosure that meets your criteria, it may not be that unicorn you were imagining you would find. Most buyers are aware that these properties need some repairs, but what most people don’t know is what could make the process very interesting.
To clarify, a short-sale is a banks method of avoiding the costly process of foreclosure and is not a “short” process. When a homeowner has a hardship, whether it be a job loss, medical bills, divorce, loss of income or other reason for falling behind on their house payments, the bank may agree to accept an amount that is short of what is owed on the property; hence the term “short” sale.
A foreclosure is the situation where the bank or government funded entity has already taken back ownership of the house.
There are several things a buyer should know about buying one of these “great deals”. When you are shopping for houses online, look for the words, “subject to third party lender approval”. Because the bank is accepting less for the house than what is owed, the lender has to approve the amount that the seller in default can accept for the house. A good buyer’s agent knows to ask the key questions about the process before making an offer. The key questions help determine the potential price, length of time, and potential issues with a contract.
Read the next sentence very carefully.
THIS THIRD PARTY LENDER APPROVAL PROCESS CAN TAKE A LONG TIME.
If the seller accepts your offer, it does not mean you are out of the woods yet. After the seller accepts your offer, the listing agent submits the file to the lender for review. You may hear back in one day or you may not hear back from the lender for months. Consider yourself lucky if you have the only offer on the table and there are no other buyers with offers being submitted.
The lender may either counter offer, accept, or reject your offer. If there are multiple offers don’t be surprised if the lender comes back and asks for your “best and highest offer.” They will most likely choose the most appealing buyer to negotiate with. Also, don’t be surprised if the lender counter offers with a price that is higher than the house was listed for.
At this point, you may have invested a few days or a few months eagerly awaiting a reply from the unnamed person behind the desk at the bank. Purchasing a short sale can be a very emotional process. It is a process that can wear on the nerves of the impatient buyer and can cause a lot of mixed feelings about the entire home buying process all together.
The properties that have already been foreclosed on can be a much faster and smoother process. Not to mention, that there is ZERO emotion involved on the sellers part. Once a bank takes back a house through the process of foreclosure, they know what the have invested in the property, what it appraises for and how much they would sell for. This is much different from a seller who has spent years in the property and has put in countless hours of work and has made a lifetime of memories who wants to overprice their house.
I’m not at all implying that purchasing a short sale is a bad way to go. My point is that if you must purchase a short-sale property, be prepared for the unexpected. Short sale properties generally carry lower prices because of the time it takes and the uncertainty that comes along with the process.
If you are looking for an experienced agent in buying a home, call or email me and I would be glad to assist you in buying your next home.
Aaron Smith
(859) 360.9997
AaronSmithHomes@gmail.com
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