10 Mistakes Home Buyers Make with Simi Valley Short Sales

Simi Valley real estate 10 Mistakes Home Buyers MakeSimi Valley Short Sales have been a big part of my business for the last couple of years.  It is important to avoid the 10 Mistakes Home Buyers Make with Simi Valley Short Sales. These transactions are very complex and not every real estate agent is equipped to handle these transactions.  It is easy to get a seller to agree to list their home, but working with the Seller’s bank to get short sale approval is another story.  Many of the licensed agents that take short sales listings have no business doing so.  It is easy to attend a seminar and get a certification, but each and every short sale I have worked on is different with it’s own set of circumstances,  nothing can be substituted for hands on experience.

Understand that the representative at the bank has a typical work load of over 100 properties on their desk in various stages of the approval process.  My job is to keep my client’s file at the top of that stack and any time the bank representative throws a condition at us, we need to answer quickly and be able to state a case in support of my Seller.

A big part of my success is using a 3rd party negotiator on my team.  My negotiator is Real Estate Attorney and Licensed Broker, while he is acting only as a negotiator, the years of experience between the two of us has proven to a 100% track record in getting approvals.  We have completed traditional Short Sales and Short Sales under the HAFA program.

Your biggest obstacles as a buyer in a Short Sale are mostly going to be related to having unrealistic expectations.  Some will be generated on your own and the rest will be generated by the real estate agent representing you.

#1. Not understanding Market Value – You will write a Low Ball offer for several unsound reasons

  • First unsound reason – The bank already has written this property off at a loss, if they don’t take my offer they will lose even more money down the road.
  • Second unsound reason – They are getting more from me now then they will if they foreclose.
  • Third unsound reason – By the time I fix up the house after I buy it, I will have $50,000 into it, so my offer needs to be $50,000 below asking.

The bank has sent appraisers out and paid other real estate agents for market opinions.  The Seller’s lender has a very good idea what the surrounding homes have sold for.  Additionally, I will price my Short Sale Listings at Market Value and this is one of the direct reasons why my Short Sale Listings not only get approved, but they also close escrow successfully. Typically the Seller’s Lender will come back and ask the buyer to come up with additional money if the Seller’s Lender thinks the offer is low compared to the market value.

#2.  Asking for Repairs – You or your agent will think that you can ask repairs after an inspection.  The seller is in a Short Sale because they are broke and out of money. They probably have barely enough money for a deposit on a rental when escrow closes. If your agent puts in your head that you can ask for repairs; you might want to look for a new agent before looking at other homes. Short Sale Lenders do not care that the water heater relief line does not exit to the outside of the home, they don’t care that the screens are broken or that the pool is green.  No they don’t care that the GFI’s are missing in the bathrooms. The Short Sale Lender has a bottom line number in their approval and if the buyer cant work with that number, then the approval will not be issued. The bank’s bottom line number and your low ball offer will not be compatible.  Seller is broke so that means you, the buyer, get the privilege to pay for the repairs.

#3. Ask for Termite – Your agent tells you to ask for termite inspection and repair.  Once you put it in the contract now your lender is going to require the work be done, but remember the Seller’s bank isn’t going to pay for it and the Seller is broke so the only person left to pay, is you the buyer.

#4. Ask for Home Warranty – Once again the Seller’s bank isn’t going to pay for it and the Seller is broke so the only person left to pay, is you the buyer.

#5. FHA & VA financing – Try a Short Sale at your own risk, because FHA and VA will inspect the house and come up with a list of Lender required repairs.  See #2 and remember the Seller’s bank isn’t going to pay for it and the Seller is broke so the only person left to pay, is you the buyer. FHA & VA buyers have bought Short Sale properties, they just had to come out of pocket for Lender required conditions and repairs.

#6. Closing costs – Your Lender or Real Estate Agent told you to ask for $10,000 in closing costs. The Seller’s bank isn’t going to pay for your closing costs and the Seller is broke so, the only person left to pay for your closing costs is you the buyer.

#7. Unrealistic about time frames – Short Sales take a long time.  I have obtained approvals in as short as 3 weeks to 6 weeks, but the majority of the approvals are taking closer to 90 days.  If you don’t know how to sit and wait for a long time with little information on the status, then you should not be writing offers of Short Sale properties.

#8. You have a home to sell – While I might be the only listing agent in Simi Valley to complete a Short Sale with a buyer who was selling their home and needed the proceeds from that sale to complete the purchase of my Short Sale;  I have not had any other bank agree to this.  The timing on these short sale approvals is so drawn out and consuming, it is very difficult to hold all the buyers together and wait for approval.  The representative for the Seller’s Lender know this and they do not approve offers that are contingent on the Buyer selling their property first.

#9. Attempt to flip or the old Double Escrow – You want to negotiate with the Seller’s Lender so you can turn around and find another buyer and make a quick profit.  My seller has no motivation or obligation to help you make a fast profit off their loss.  Keep in mind that the Seller’s Lender may have deficiency rights against may seller, so my seller would be crazy to take on larger future tax and deficiency obligations for your investment plans.  I wrote “Beware of Short Sale Flipping” which explains this better, but it can be illegal and FBI has been going after investors that are concealing their profit schemes from Short Sale Lenders.

#10. Not understanding THE SELLER IS BROKE and THE SELLER’S LENDER IS NOT GOING TO AGREE TO PAY FOR THINGS YOU DEMAND.  You should realize by now that there could be as much as $1,000 or even $2,500 of issues on a Short Sale property and if you are not prepared (as a buyer) to deal with those issues, you probably should not be writing offers on Simi Valley Short Sale properties.

The Seller’s Lender has a sale price they are willing to accept for the property that is going to be very close to market value.  The Seller’s Lender will try to get the buyer to pay over market value.  The Seller’s lender is going to try every possible thing they can to to minimize the the costs to sell the property which is why buyer demands are not the concern of the Short Sale Lender.

To understand the short sale process better please read

About Ted Mackel

Active real estate broker and entrepreneur in Simi Valley. Ted has a passion for business, has deep knowledge about residential and commercial real estate and is one of the few to be a long time blogger/writer on these subjects. In his free time you'll find Ted enjoying baseball with his family (Go Dodgers), reaching his goal of spanish fluency, and pursuing his hobbies with RC aircraft and Lionel Trains.

Comments

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