Colorado Springs Vintage Homes Blog
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Should I buy a Short-sale?
Buying a Short Sale property can be a great way for a home buyer
in Colorado Springs to get a good deal
Make sure you understand the facts of a short sale — Knowledge is Power!
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What is a Short Sale?
A short sale occurs when a house is worth less than the mortgage, and the seller’s lender accepts less than what is owed on the mortgage.
As an example, a seller may have a mortgage of $250,000. The seller is taking a job in a new city and the house is now only worth $220,000. A buyer makes an offer on the house in the amount of $220,000 and the net proceeds to the bank is $205,000 by the time the owner pays the real estate commission and the seller’s closing costs. The buyer and seller sign the contract but the offer is subject to approval by the lender, as the bank than must agree to accept $205,000 vs. $250,000 to pay off the loan.
Some statistics say that a lender typically loses about 19% of a mortgage’s value in a short sale; while they lose an average of 40% on loans that go into foreclosure.
How does a homeowner in Colorado owe more than the house is worth?
This is typically due to a house decreasing in value.
Why would a lender agree to take less than the loan amount?
It is cheaper for a bank to take less than the mortgage vs. letting the house go into foreclosure.
A short-sale sounds like a great deal, I want to make an offer.
A successful short sale can be a great deal for a home buyer in Colorado Springs, but there are several things to keep in mind before deciding if you want to put an offer on a short sale property.
Short sales take time. The buyer and seller come to agreement on the purchase price and other terms in the contract, but the offer is subject to lender approval, which can take 30 to 160 days.
Lenders don’t have to accept the offer, there is no guarantee they will. It’s a business decision for the lender; they’ll look at the net price and the buyer’s hardship as well as a variety of other factors before saying YES.
Short sale properties are typically sold “as-is”. As a home buyer, you should still conduct an inspection, but the seller won’t be repairing anything at the property. The inspections can be challenging to conduct, as many pre-foreclosure properties have had the electricity, water, and gas turned off for non-payment.
Many Colorado Springs homes listed as short sales are going into foreclosure. If the home owner hasn’t had enough money to make their payments, chances are they also have been deferring maintenance on the property.
Do your homework on the asking price. Just because it is listed as a short sale doesn’t necessarily mean that it is a good deal. A property can be a short sale and still be priced too high.
Why does it take so long for a lender to approve a short-sale?
The volume of short sales has made it hard for lenders to keep up; many lenders are overwhelmed with the volume.
Do the lenders have the final say on accepting a short sale?
Many loans have been pooled and resold to an investor; consequently the loan investor may also need to approve the short sale. It may be a Freddie Mac or a Fannie Mae loan or another investor may be involved; consequently they also need to approve the short sale.
Can I make an offer on a short-sale without a Realtor?
Yes, you can but I would highly suggest that you use a Colorado Springs Realtor who understands short sales and can help guide you through the process.
The above information is to be used as a general guide and is by no means to be used as legal or tax advice.
To find out more information about Short Sales
Call the AllStar Team, Kathy (719-287-1049) or Nancy (719-659-4380)
