The 5 Most Common Complaints of Short Sale and REO Buyers
(and How to Avoid Them)
May 16, 2011
Roughly forty percent of the homes for sale on today’s market
are short sales and foreclosures! Distressed properties are well known for
their value (a reputation which is sometimes accurate, and sometimes not), but
they also have a reputation for causing buyers to become distressed, too!
Transactional snafus, last-minute surprises and long, drawn-out escrows that
never close seem to be par for the course. Instead of avoiding these
properties altogether, get educated about the most common dramas that go down
in these deals, and how you can avoid falling victim.
1. Run-on (and on, and on) escrows. When you’re buying a home (or selling one, for that matter),
time is absolutely of the essence. And buyers reasonably expect that the
big time suck in real estate is in the house hunting process itself; seems like
once you find a home you want to buy and the seller agrees to your price and
terms, things should move pretty quickly, right?
Not so much, when it comes to some distressed property sales.
For the most part, these transactions take anywhere
from a few days to a few weeks longer than “regular” sales, because of the
extra signatures, supervisor-level approvals and even investor involvement
required to seal the deal. Banks don’t have the same sense of urgency
individual home sellers do, and it’s not uncommon for the people who need to
sign on the dotted line to be on vacation or scattered across the country,
adding days’ or weeks’ worth of time to the escrow.
And short sales are also an entirely different animal when it
comes to escrow timelines. While a standard sale from an individual seller to
an individual buyer might take 45 days from contract to closing, a short
sale can take anywhere from 45 days to 6 or 8 months (!) to get the deal
closed, after the seller has accepted the contract.
Avoid the drama by: expecting your escrow to run long, and
being pleasantly surprised if it doesn’t. Expectation management is
everything. Make sure you take these extended timelines into account when
you’re working with your mortgage broker on the issue of when to lock your
interest rate, and how long your rate locks will last. You might even need to
plan on and/or set aside an allowance for the cost of extending your low
interest rate, if rates are rising rapidly during the time you’re waiting for
the deal to be done.
Author: Tara Nicholle Nelson from Trulia.com