Short Sales and Foreclosures: Work with a Licensed Real Estate Agent

Because of the economic climate, the bargain hunter is able to find many great deals through short sales and foreclosures. While many bargain hunters can save money by foregoing the use of a real estate agent, many have discovered that hiring a licensed real estate agent specializing in short sales and foreclosures can serve as a guide through an otherwise confusing process.

Short sales occur when the owner of the home cannot sell the property to cover the amount owed on the loan. When the owner cannot pay the amount owed, the lender negotiates a price to sell the property at a moderate loss rather than allow the property to foreclose. Typically, when the property forecloses the lender has a more difficult time negotiating a price that is comparable to the amount owed on the home loan. Therefore, short sales were introduced as a solution to assist both the lender and borrower.

From the buyer’s perspective, short sale negotiations can occur as quickly as seven days or can take a period of six months depending upon the workload of the lender. Most typically take 30 days or more. Licensed real estate agents who specialize in short sales can assist in navigating the negotiations process. They can determine whether the home has a second mortgage and expedite the transaction with the lender through follow-up. Since most properties are purchased “as is” due to the seller’s financial hardship, the real estate agent can direct the buyer to properties where repairs are minimal.

The real estate agent can assist the buyer in making a reasonable offer to the bank based on comparables and recent sales in the neighborhood. If the offer is still unfavorable, the lender has the right to refuse. However, an experienced real estate agent can advise the buyer of what a lender will typically accept in certain situations. Real estate agents can be a valuable tool; however, they are not legal experts. All related legal related questions should be directed to a licensed real estate attorney.

Also be advised that since there is no profit to the seller from a short sale, the lender pays the agent’s commission. If the lender will not cover the commissions, the buyer may assume liability. Inquire with the lender if the costs will be covered. Also, ask if the agent will waive the fees.

Some real estate agents have never processed a short sale and therefore, may not be a viable resource. It is recommended to hire a person who has experience, so that they can instruct the buyer of the potential pitfalls.

Foreclosures occur when the lender repossesses the property due to default on a loan, taxes owed, home owner’s association dues, or other debts. Once the property forecloses, the lender has the right to sell the house to recoup losses from the defaulted loan and any associated legal fees.

The real estate agent can determine whose name is on the title and whether or not a foreclosure has been filed. Often times owners who are in foreclosure, neglect and vandalize the home prior to leaving. The real estate agent can identify those homes to potential buyers. Homes in foreclosure may not be owner occupied. In this case, the buyer may not have access to the home prior to purchase. The real estate agent can identify these properties, as well.

With foreclosures, the negotiations will be solely with the lender because it is a real estate owned (REO) property. For properties on the market less than 30 days, banks typically will not deviate from the asking price. The real estate agent can advise the home buyer of the best time to present an offer to the lender to increase the likelihood of acceptance. The real estate agent can advise the buyer of the fees that the lender will assume, as well as, what fees will become the buyer’s expense. While the real estate agent can advise the lender on the bank’s contract, it is recommended to allow a real estate attorney to address any questions the buyer may have.