Over the years I have endeavored to sit down with home buyers to get a good feeling for what they want in a new home. We talk about their lifestyle more than square footage and age of the property. We discuss the price and payments they will be comfortable with rather than what they qualify to buy. I encourage them to get prequalified before looking at too many houses, not because I want that prequal letter in hand before we write an offer, but so they don’t fall in love with something they can’t afford and then be disappointed. If they find a $300,000 home they love, it’s more difficult for them to accept a $225,000 home they can afford. This counseling has worked great over the years.
Then along came Short Sales. As most of us are aware, a short sale is when the seller owes more than the house is worth. The goal of a Short Sale is to sell the home and have the bank(s) holding the mortgage(s) take less than what is owned. It can be a tedious process for both the seller and the bank and has historically taken a long time to close. This method of selling can be good for the seller and the bank and may be a good buy.
It can also be a trap for unsuspecting buyers and their agents. Some listing agents are pricing homes well below market value to attract as many buyers and offers as possible. A couple of things occur when this happens. Multiple offers are generated and buyers fall in love with and actually write offers on homes they cannot afford. Banks and Mortgage Companies are not fools. When negotiating a short sale, they will have a third party broker provide them with a market analysis showing the true market value or have an appraisal. Buyers should make sure they have their Buyer Brokers do a market analysis to see what the true market value is before submitting an offer. Buyer Brokers can find out how many liens are on the property so you know how many banks will be negotiating. Ask the seller’s agent if the loan falls under the new Fannie Mae guidelines regarding short sales: http://bit.ly/19YxHG3 .
Getting into a hornet’s nest of multiple offers and/or finding the right house to actually be out of your price range can be peevish on anyone’s house hunting adventure.