Step #7 – Engage in Negotiations
After the short sale proposal is given to the lender, negotiations will often ensue. It is very common for lenders to reject the first offer, then responding with their own counteroffer. Expect this to occur when preparing to purchase a short sale property.
Of course, it is important for buyers to know their highest limit on the home, which is important when engaging in any real estate transaction. If buyers are unhappy with the counteroffer provided by lenders, they do have the ability to come back with their own counteroffer. Keep in mind, if the lender will not meet the highest limit of the buyer, buyers can walk away without consequences.
To avoid extended negotiations, it is important to ensure the original proposal includes all relevant information, focusing on making the short sale look like a benefit for the lender. A well prepared proposal may help buyers to skip this step if lenders agree to the initial offer.
Step #8 – Complete the Sale
Once all three parties have come to a final agreement – the lender, buyer and seller – then everything must be in writing and recorded officially. Buyers should make sure that they and the seller understand all the terms that come with the sale. Next, closing will occur and the property will officially become the buyer’s.
Other Important Details
When going through the buying process, a few other details must be kept in mind by buyers. The following are some important details to remember when deciding to go through the short sale buying process.
- If more than one lender is involved, the process can become much more complicated and there is less certainty of success. Junior lenders are often the ones that deal with the most loss. Buyers must remember that if there are junior lenders on the home, approval is needed from each lender to go forward with the sale. If the mortgage loan of the seller was sold to another entity, which is known as securitization, then that company will also have to offer approval before the transaction can be completed.
- It is essential to do a title search when pursuing this type of a sale to find out about the lien position of the lenders that must be contacted. Short sale transactions should be pursued with the primary lien holder and then seek approval from junior lenders. Trying to make the initial shortsale deal with the junior lien holder will not work, since the primary lien holder still has to be paid what they are owed.
- Timing is important, which is why some buyers have avoided these properties in the past when ready to buy a house. The clock continues to tick while going through negotiations with the lender. Buyers should work to get lenders to move as fast as possible. In some cases, these sales have been known to fall apart because the lender moved slowly and the deal was not completed before the property had to go to auction.
- In some cases, buyers have been able to negotiate with lenders to help the seller minimize the damage they face to their credit rating. Although lenders are not obligated to agree to this term, putting this in writing as a part of the deal can help the seller and enable them to more easily rebuild their financial lives. Buyers may want to consider talking to the seller and trying to find ways to include this information in the agreement to try to minimize the damage done to the seller’s credit report.