Springfield Real Estate News
Buying a Short Sale or Pre-Foreclosure in Springfield MO
By Team Thomas
Let’s begin by explaining what a short sale is. A short sale is when the seller is behind in payments and is potentially facing foreclosure. The seller then asks the bank if they will take less for the house than what they owe on the house. For example, a seller has a mortgage on a home with a balance of $130,000. The seller has come into hard times (job loss, death in family, medical issues, etc) and has missed a payment or two. The seller decides to try to sell the home quickly before the bank starts foreclosure. The seller lists the home on the market for $110,000. A buyer comes along and offers $100,000. The seller then presents the offer to the bank and requests the bank takes $100,000 for the sale of the house rather than going the foreclosure route. The bank then determines if it will write off the $30,000 difference.
It can be a win-win-win for all three parties. The seller is able to avoid foreclosure. The bank avoids the extreme costs of foreclosure. The buyer gets a house well under market value. Sounds perfect right?
It can be a match made in heaven as long as you enter with caution. As the buyer the downside to the short sale is that you’re working with two sellers; the actual home owner (that most likely still occupies the home) and the bank that has the lien on the property. Both the seller and the bank have to agree to the contract before you have the home under contract. This can take time. The bank will go through a strict process before they will agree to take less for the home than what is owed. The bank will send out a bank appraiser to value the property. The bank will then calculate their loss to determine is the risk is too great. All of this takes time. As a buyer you should be prepared to wait three to six months for an ANSWER from the bank. Once you’re under contract then you can trust you’ll close and take possession in 30 days just like a normal home sale in Springfield MO.
A recent trend we’ve experienced is the bank countering the offers over asking price. In this scenario, the bank could come back to the buyer and counter with a $120,000 sales price. That’s $10,000 over what was listed in MLS, but also $10,000 less than what the seller owes on the home. It’s hard for the buyer to imagine a counter OVER asking price. It’s something you need to be prepared for when dealing with short sales.
My best advice is to have an experienced Realtor to guide you through the process. You’ll need someone organized and knowledgeable to stay on top of the sale. At Team Thomas we help buyers purchase short sales all of the time. We also help guide sellers through the short sale process.
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