So, you're buying a short sale home in Boise. You've made an offer that has been accepted by the sellers and now your ready to move toward closing. What can you expect going forward? What will be different about this purchase then the purchase of a regular sale or a foreclosure? Read the information below and if you haven't already, please also check out Part 1 of "What you need to know when buying a short sale home in Boise"
If you are moving forward with buying a short sale home in Boise, here are a few things you should know
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Why can it take 90+ days to hear back from the bank on my offer? If your offer on a short sale is accepted by the seller and submitted to the bank for approval, the length of the time it takes for the bank to respond can range from 2 weeks to 90+ days and depends largely on 4 factors:
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The bank being dealt with. Some banks have better processes in place to handle short sale files. Also, some banks have fewer files to review or more staff to review them, allowing for a faster response time.
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The number of banks involved. If the seller has two loans on the property, there may be two banks involved in the decision making process. This inevitably complicates negotiations and increases the time it takes for a response.
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The efficiency and work load of the negotiator. The negotiator or loss mitigator is the person from the bank who is assigned to negotiate on and recommend approval of a short sale contract. Some negotiators are assigned hundreds or thousands of short sale files, which greatly affects their ability to respond in a timely manner. Moreover, the job turn over rate for loss mitigators is considerably high. Which means that the negotiator assigned to your file could quit mid-way through the transaction, forcing your file to be reassigned and potentially adding several more weeks to the response time.
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The experience and competence of the listing agent. The more short sale experience the listing agent has, the better prepared they will be to successfully facilitate the process of buying a short sale home in Boise. An experienced listing agent knows how to work the offer through the system, minimize anticipated snags, and prepare a complete short sale package (which includes the sellers financial information and their reasons for not being able to pay the mortgage). Since a complete short sale package is necessary for the bank to make a decision on the contract, a good short sale agent will gather all this documentation BEFORE listing the home. This way, everything is ready to submit as soon as an offer comes in. Putting together this information after the fact or putting together an incomplete package can add weeks to the process. If the listing agent has a bank pre-approved price or good communication with the assigned negotiator, they can often cut a 60-90 day response time to 30-45 days.
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What can my agent do to decrease the response time? Unfortunately, if you are buying a short sale home in Boise, your agent has little power to assist with getting your offer accepted in a timely manner. Only the sellers and their authorized agents (namely the listing agent and the Title company) have the authority to contact the bank. Although your agent can't help push your offer through the process, they can review comparables prior to making an offer and advice you on an offer price and terms that will likely be attractive and acceptable to the bank once the bank actually does get around to reviewing your contract. Additionally, your agent can ask the listing agent questions to get a better gauge on the qualifications of the listing Realtor and the likelihood of a successful short sale purchase.
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How likely is it that the bank will accept the price and terms I offered? One of the most important things you need to grasp when buying a short sale home in Boise is that, in the eyes of the bank, they are doing you and the seller a favor...not the other way around. They do not feel pressure to sell the home, accept the terms presented, or respond to your offer in the timeframe requested. Basically, you cannot convince them to move faster, even with an incredibly attractive offer price, a quick closing date, or an all cash offer. When your offer comes in to the bank, it goes to the bottom of the stack and begins its journey to the top -- they get to it when they get to it. If you've lost patience and jumped ship prior to that, the bank doesn't have an ounce of heartache or regret. In short, if you really want the house, you will need to be patient with their timeframe, grasp the fact that you will have little negotiating power, and be willing to accept the terms they require. Otherwise, the bank will move on to the next willing buyer. Here are a few terms they are likely to accept or not accept once they get to your offer:
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They want a reasonable offer price, usually no less than 85-90% of the market value.
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Your offer can be contingent on getting a home inspection and approving of the property following such inspections. However, they do not accept offers that are contingent on selling another property or obtaining financing that you have not yet received preapproval for. You need to be free to buy the house within 30 days of them accepting the offer and your offer needs to be accompanied by proof-of-funds for a cash purchase or a lender preapproval letter if you are getting a loan.
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Although you are able to get a home inspection, neither the bank or the sellers are likely to take care of any repairs. Thus, if you choose to proceed with the purchase after the inspection, you will be purchasing it "as is".
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The bank will generally agree to pay for the owner's title insurance policy and half the escrow fee, but the remainder of the closing costs are left for the buyer, including the cost of the appraisal.
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Many banks are willing to pay up to 3% of the buyer's closing costs if the buyer needs them paid and if they offer a reasonable price.
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How long will I have to close once the bank has accepted the offer? If your offer for buying a short sale home in Boise is accepted, most banks will expect you to close within 30 days of receiving the written acceptance. Thus, you need to be flexible with your moving date. Know that if you receive acceptance quickly you could be moving 30-40 days after submitting the offer. On the flip side, if the approval process is long it may be 3-4 months before you move into your new home. And, if the bank does not accept your offer, you may wait 60-90 days just to find out you won't be moving into the house at all and the house hunting process continues.
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When do I have the home inspection and what happens if repairs are needed ? If you are buying a short sale home in Boise, your offer will include a form called an RE-44 Short Sale Addendum. This form states that your timeline for inspections and other obligations will begin upon the date you receive written approval of the short sale from the bank. Thus, you do not need to go out and spend money on a home inspection until you know for sure your offer has been accepted by the bank. Since most short sale properties are sold "as is", neither the bank or the sellers are likely to do any requested repairs. However, you do have the option to terminate the contract within the inspection timeframe and receive a return of your earnest money should you find needed repairs beyond what you are willing to perform or pay for yourself. Because there is always a chance that a property could have an issue that would keep you from buying it, some people who are buying a short sale home in Boise will choose to do the inspection PRIOR to receiving written approval of their offer. This way, if there is something found on the inspection that would prevent the buyer from purchasing, they don't have to wait 30-90 days before finding that out. They can write-off the property early in the process and move on down the road to finding another home. NOTE: Although section 10A of the Purchase and Sales Agreement states that the seller will be responsible for making sure all the utilities are turned on for the inspection, this is not always the case. There are many short sale properties that are left vacant. Sellers who are unable to pay their utilities have them turned off and do not have the funds to turn them back on for your inspection. Since the bank will not pay to turn them on either, you may have to bear the cost of turning the utilities on for the inspection and off after the inspection is complete.
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What else can I expect to have to do prior to closing on my home once the bank has accepted my offer? Once the bank has accepted your offer, the rest of the process of buying a short sale home in Boise is much the same as buying a home that is being sold in the traditional manner. Check out the articles on my Buyers Guide under Step 5:From Contract to Close, to learn more about the closing process.
If you have more questions about buying a short sale home in Boise, give me a call or send me an email. I would love to provide you with free, helpful information to aide you in the successful purchase of a short sale property.
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