In this Chicago real estate market, many buyers are seeking out homes for sale in Chicago that are potential short sales. Since you can get a seriously reduced price on a short sale, it may seem like an alluring option.
But, if you are going to try to complete a short sale interaction, there are many factors you need to understand. These factors can prevent your offer from being accepted, leading to disappointment for you as the buyer. Read on to gain insight on the mindset you should have as a home buyer who is shopping for short sale properties.
What exactly IS a short sale?
“A short sale is an attempt by the current owner to sell a home in lieu of the bank taking it back through foreclosure proceedings, thus partially salvaging their credit rating and lifting the burden of heavy mortgage debt,” says California agent Todd Foust.
Short sale prices are usually low because the owner is trying to move the property quickly. The danger is the bank that owns the loan on the home will not accept the loss in order to avoid expensive foreclosure proceedings. There must be an adequate balance between the lowered price of the home and the amount the bank will save by avoiding foreclosure on the home.
According to Foust’s article on short sale expectations, there are 10 things you should know of and be prepared to face when you are shopping for a short sale purchase. Here are a few you should really focus on:
1) Chicago homes for sale are priced by the seller and the real estate agent, not the bank.
This means the price that caught your eye, probably because it was nice and low, is not yet approved by the bank. Since the seller and agent are trying to attract buyers like you as quickly as they can, you can rest assured that this price is on the low side and may not be approved by the bank that is involved. You need to know, going into the purchase, that the price you offer to pay may not be approved by the bank. Be prepared for this and you won’t be disappointed too badly.
Chicago homes for sale that are nearing foreclosure often get sold as "short sales," which are priced low to sell fast.
2) Chicago homes for sale with only one loan get more easily approved for short sale.
Some homes for sale in Chicago that are nearing foreclosure probably have more than one loan taken out on them. And if those loans are owned by different banks, that means two different banks have to approve the sale. More players in the game obviously means more chances that you won’t get approved. An offer for short sale on a home that only has one loan is more likely to be accepted.3) There are Chicago homes for sale whose short sale has already been approved.
If you want to take a price that is pre-approved, there are properties for sale that have already been priced at a point that the bank agrees upon. This may not be the lowest price you can find for a comparable home, but the process of buying it will most likely be much faster, saving you time and hassle.
For more of the top 10 things to expect, see what California agent Todd Foust has to say about buying a short sale home.
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In Singapore, we call the short sale a fire sale. Eventhough the selling price may be below the bank’s valuation, the seller is still liable for any shortfall in outstanding mortgage.