Short sales are one of the many sales vehicles investors use to purchase residential real estate. Unlike traditional transactions, short sales have unique problems and variables. We contacted a number of short sale specialists to better understand some of the issues that can arise for the investor/buyer. Below is a list of the predominant concerns the experts voiced.
THE PURCHASE OFFER: Shorts sale purchases come with a number of special addendum. The property is generally offered in AS IS condition as well as being a short sale. Addendum to the contract for these special circumstances are generally required. Most banks have additional special addendum the buyer will be expected to execute. Experts say that many offers are rejected because all the required documents are not included in the original offer package. Make sure all the required addendum and documents are included at the time you make your offer.
HOA FEES: Unpaid HOA fees are often an issue at COE. Homeowners tend to stop making their HOA payments, thus accumulating late fees and penalties in addition to the unpaid dues. Most banks are refusing to contribute to this deficiency. The burden is placed either the homeowner or the potential buyer. We advise short sale buyers to be aware of this possibility when buying a home that resides in an HOA and expect to be asked for a contribution. It may not happen but it is better to be prepared.
PROPERTY TAXES: As with unpaid HOA dues, property taxes must be brought up to date in order to close escrow in most transactions. Buyers should be aware that some banks feel it is the responsibly of the home seller to bring these current. If that homeowner/seller does not have the funds, you may need to participate in order to complete the transaction.
DEFICIENCY: If you are buying a short sale, know the bank may require the seller to sign a note for the deficiency amount; This occurs most often if the home is 2nd home or investment property or if the 2nd lien is a home equity line of credit. This can be a last minute deal killer.
THE REAL ESTATE AGENT: The listing agent for a short sale is a very important player. Make sure they know what they are doing and have had success in closing short sale transactions. Good negotiation skills, knowledge of the players and keen record keeping are needed skills.
TIME TO CLOSE ESCROW: Short sales, on an average, take a longer period of time to close escrow than most transactions. We reviewed 300 closed short sale deals in the Greater Phoenix market and found it took the average transaction 100 days to complete; This was the average and many took much longer.
CYA STATEMENT: The aforementioned items do not constitute all the possible concerns and problems one can experience during a short sale transaction. Please seek the advise of your real estate agent/broker and legal counsel during a real estate transaction.
We hope this has been of help and please feel free to contact us with additional questions and concerns. Be advised that our expertise lies in the Greater Phoenix Arizona region and may not be applicable to other states and countries.If you would like to search the short sale and bank-owned home market in the Greater Phoenix area, please give our always up-to-date search tool below a try. Everyone says it is the best!!
Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777
