Short sales are quicker the second time around

Short sales are quicker the second time around

Ask Phyllis: a blog series of frequently asked real estate questions. Email us here

Dear Phyllis,

My husband and I have been looking at homes for about six months. Because of all of the horror stories we have heard, we have tried to avoid short sales. But we saw one we really liked. The ad states that a short sale received approval for a previous buyer who cancelled escrow. What should we look out for?

Sonia

Dear Sonia,

Often, short sales are quicker the second time around. Find out why the first buyer cancelled escrow. Did they just tire of waiting? Or during an inspection did they learn that the home’s condition was worse than anticipated? Ask the Realtor if any inspections were performed and if so, ask for a copy.

As the short sale received approval once already, the preapproval will likely be quicker than starting from scratch. When short sales receive approval the investor also approves a dollar amount that the investor must receive. Escrow will calculate closing costs such as commissions, escrow and title fees, tax prorations, etc. The investor will also give a deadline for closing.

Always have your Realtor obtain a copy of the written short sale approval. Review the short sale approval with escrow to verify that the net to the investor will allow for the commissions, escrow, title, property taxes and other fees to be paid. When I represent buyers, I typically don’t have them pay for a property inspection or appraisal until I receive a copy of the written short sale approval.

Each short sale is different. Short sales are generally sold AS IS; the seller/investor will generally not make repairs. But in the event of major hidden defects you might try to renegotiate with the seller/investor/lender. It is doubtful that the investor is going to allow a renegotiation over leaky plumbing or an old roof. But if you learn of a cracked chimney with a $15000 rebuild cost, you might try renegotiating.

Although it is customary that Los Angeles home owners provide section I termite, I have yet to see an investor approve termite costs. You may consider asking the short sale lender to pay for a percentage of your closing costs; sometimes they will. Although previously approved for a specific dollar amount, now that the original buyer has cancelled the investor may approve a lower offer.

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