Buying a short sale home in Boise can be a long and cumbersome process, but it can be beneficial as well. Successful short sales mean low prices for buyers and foreclosure avoidance for both sellers and banks.
If you are considering buying a short sale home in Boise, here are a few things you should know:
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What is a short sale? A short sale is when an owner sells their property for a price less than or "short" of what they owe on their mortgage. Since the proceeds of the sale do not cover the debt and the seller does not have assets to cover the shortage, the seller requests that the lender forgive them the difference between the sales price and what is owed.
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Are there still a lot of short sales on the market? Although the number of distressed properties has dropped substantially in the last year, short sale homes still make up about 20% of the inventory in the Boise market. You can check out some Boise short sale listings HERE.
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Why do sellers short sale? A short sale is an alternative to foreclosure. One of the main reasons a seller may choose this alternative is that they can often purchase another home 1-2 years following a short sale versus 3-7 years following a foreclosure. In order for a bank to allow someone to short sale their property, the seller needs to be at or near default status on their loan and be able to show they have fallen under hard times. Examples of acceptable hardships are unemployment, divorce, medical emergencies, sudden illness, bankruptcy, or death.
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Who owns a short sale property? Opposed to a foreclosed property where the bank owns the home, a short sale property is still owned by the seller. However, as with all homes with loans, the bank holds the primary interest in the property -- the mortgage.
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Who sets the price on a short sale listing? The list price is typically decided by the listing agent and the seller. The agent reviews comparable sales in the area to determine a price that is low enough to attract buyers but high enough that the bank will accept it. When buying a short sale home in Boise, it is important to know that even if you offer full price on the property, it DOES NOT guarantee that the bank will accept. On the flip side, some banks may be willing to accept less than full price. To give you the best chance of making an offer that will be a good deal for you and an acceptable deal for the bank, your buyers agent should do their own comparative market analysis to determine a price that is supported by recent sales and within a range the bank would realistically consider.
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Who is the decision maker? When buying a short sale home in Boise both the seller and the bank serve as decision makers, but the bank has the final say. Your offer will first be presented to the seller who will decide if they like your terms. If they do, they sign the offer, subject to their lenders approval. The offer is then forwarded to the bank, who will be the ultimate decision maker as to whether or not your offer is accepted and the sellers debt forgiven.
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What is important to the seller when considering an offer? When buying a short sale home in Boise know that the seller will not make any money on a short sale, regardless of the price offered. Thus, sellers are not necessarily looking for the highest offer, but the offer that will give them the best chances of actually closing on the short sale and avoiding foreclosure. They want an offer from a buyer who is committed to sticking through the process and who offers a price and terms that are attractive to the bank.
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How does a bank decide if they will accept the offer? When a signed offer is submitted to the bank, the bank begins the process of determining whether or not to accept the short sale. The first step of this process is usually to order a Broker's Price Opinion (BPO). This is a price valuation done by a broker in the area that is not party to the transaction. The results of the BPO help the bank determine whether or not the offer received is within an acceptable range. Generally, banks are looking for offers that are around 85-90% of the current market value.
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When will I hear back on the offer? The seller will usually respond within 24 to 48 hours. If they accept, the offer is sent to the bank, whose response time is typically between 30-90 days. The amount of time for response varies depending on the bank that is being dealt with, the number of banks that have an interest in the property, the competence and experience of the listing agent, the accuracy and completeness of the short sale package, and the number of short sale packages in line for review.
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