Word on the street... short sales are more common, but still a tough, confusing road for some buyers.
Last week, I represented my clients in an offer on a short sale property in the North Park neighborhood. A short sale is a property offered at less than the owner owes the bank. The bank is agreeing to "sell short" in lieu of foreclosure proceedings on the owner that must get out of the property and can't afford to own it. The owner must show they have no assets to make the bank whole on the loan.
It turned into a multiple offer situation due to an attractive price... and we won the bid with the best overall offer. However, this just means the sellers are accepting the offer with their signatures... only now to send the offer to the bank for approval.
So, when do we have a deal? When do the contingency dates such as inspection, mortgage and attorney review start? For instance, the bank still has to approve the deal.... does that start attorney review? For these types of questions, I get the purchasers attorney involved right away to make sure the buyers know their obligations. In our case, the contract was written to start attorney approval and inspection at time of seller acceptance... and that's how we'll proceed (in addition, I request the buyers attorney contact the seller's attorney immediately).
There are basic things that can take place once you have the sellers accept your offer, and in turn, negotiate for approval from the bank. In this case, I feel we have a pretty good chance of approval as we are close to the short sale offer price and have solid financing lined up.
First, I collect all the legal condo documents possible from the sellers and begin my due diligence on behalf of the client. We'll want to see the condo declaration, the association budget, any meeting minutes and talk to the Board if possible.
Secondly, we can schedule the physical inspection of the property. In most short sales selling well below what is owned on the property, inspection items will not be negotiable or corrected by the seller. They are already in distress and most likely will not have more to bring to the deal. However, my clients can kill the deal should their be any major repair issues with the unit (highly doubtful in this case).
Clients need to plan and make sure they can wait for a response from the bank. The closing date may also be months from bank approval. Purchasers need to be flexible when buying a short sale, and possibly, may need to arrange for temporary housing to bridge anytime they are out of their former place to live prior to their closing date.