Academy School District 20 Homes - Writing An Offer On A Short Sale
Things To Consider When Writing An Offer
On A Short Sale In Colorado Springs
Writing an offer on a short sale in Colorado Springs is very different than writing an offer on a resale property. Probably the biggest difference is the level of cooperation between the listing agent and the buyer's agent.
Has the buyer's agent talked with the listing agent? This is critical and must be done very early in the process. I like to call the listing agent before I show the property to ask for information that is not available in the MLS. Depending on the answers will determine if I show the property. If my buyer can't wait for approval on a 1st and a 2nd, then I won't bother showing the house. Other things of importance to know in advance:
- How many loans are on the property (more than one will make it more difficult to get approval)?
- Have they submitted any offers to the bank yet? This tells me if the listing agent has talked with the bank and has any input on price from the bank. You can also get a feel for how experienced the listing agent is with short sales.
- Is this a Home Affordability Foreclosure Act (HAFA) approved short sale? The answer to #2 will answer this question. With a HAFA approved short sale, the listing agent will know what the bank has approved for the short sale. Additionally, with a HAFA the bank is required to respond to offers within ten business days. For more information on HAFA approved short sales, visit Short Sale FAQs.
- What bank are we dealing with? Some banks are more difficult to work with than others for getting short sale approval.
What did the seller pay for the house? This is really a nosey question and should not come into play when determining the offer price. But if the purchase was within the last 3-4 years, it gives you an idea of the depreciation in the area, and also helps explain their situation. They purchased at the peak of the market (07 - 08) and something caused them to lose their house possibly to foreclosure if they don't sell as a short sale. The short sale process is very emotional for the seller, so I explain to the buyer that we still need to be reasonable with the offer.; The deal isn't just with the bank.
How much do they owe? This gives us an idea on what the bank will accept. If the seller owes more than the house is worth, then chances are, it will take longer to get approved. This is because the bank has a net in mind on what they want to get on the sale of the home. The bigger the difference on what is owed and what the home can sell for affects this net and can delay approval. Many buyers do not understand that the list price is not necessarily the price the bank will approve for the sale. Sometimes the seller has to drop the price of the home until they get an offer, this may be because of the market or the condition of the home. The first time the bank sees a sales price is with the first offer, which they don't have to agree to, and many times will counter. Once the listing agent has this number, they can market the home with an approved short sale price, if the original buyer did not agree to the countered price.
What does the market analysis tell us? When making an offer on a short sale, you want the property to be in the lower end of the market for the area, with traditional resale properties priced higher. If you are buying a distressed property, then you shouldn't have to pay market value. Chances are if the seller wasn't making mortgage payments, then they probably weren't maintaining the property either.
What are the clauses and/or disclosures required by the bank? All banks want the contract to include specific clauses that all parties agree to. At a minimum there is usually an "arm's length" clause assuring that the buyer and seller do not know each other, and a "sold as-is" so the buyer understands that the bank will not make repairs to the home out of the proceeds of the sale.
What will the bank pay in seller paid concessions? This may not be known until the bank responds to the first offer. Sometimes we do know this value in advance if there was a previous offer or if it is a HAFA short sale. Most banks will agree to pay up to 3% toward buyer closing costs.
By Nancy Murray
Murray & Associates, Keller Williams Colorado Springs