Buying Short Sales: 3 Things Your Agent Must Check

If you’re at all familiar with the concept of short sales you know there can be some serious flaws in the way banks and sometimes agents manage the process. Buyers brave enough (or patient enough) to consider short sales as part of their home search should be sure their real estate agent spots any problems that might arise from day 1 and not 3-6 months down the road. Here are the top 3 things your agent should know and check upfront.

1. HOA Fees – This should always be the 1st question your agent should ask when entertaining a short sale. “Is the seller behind on HOA Fees?” If the answer is yes, the follow up should be “How Much?” The reason these are critical questions is because lenders/banks will rarely pay to make up these fees and will likely be passed on to the buyer. These can range from $500 to as much as $10,000. Not everyone is able or willing to add additional $$$ to the cost of buying.

2. Number of loans/lenders – Generally speaking, the more lenders involved in a short sale, the longer the process will take so it’s important to set the expectation from the beginning. Many lenders have reputations (good and bad) when it comes to short sales so knowing which banks and how many loans will provide more clarity (relatively speaking) to agents and be able to communicate their experiences to their buyers as to what to expect. Smaller lenders tend to be more strict when it comes to their payoffs so knowing this may prepare you for a possible additional $$$ contribution to make the deal work.

3. Prelim – The Preliminary Title Report is by far your best tool. It serves as a blue print of the property and will list any encumbrances or liens that all parties need or should be aware of. As a precautionary measure I personally order and review a preliminary title report on all of my listings within days of listing the property for sale. The reason? You never know what you’ll find and you cannot sell a property unless you have clear title. I recently listed a property in Rancho Del Rey. Upon reviewing the prelim I came across a trash lien of nearly $600 which was recorded 1 week after the current owners purchased the property. My sellers had never heard of it since it was actually recorded against the previous owner. After working with the title company we were able to get the lien removed and not have to worry about it any more. Had I not reviewed this, we may have moved forward with an offer just to find out at the last minute that the trash lien would have to be taken care of somehow.

Surprisingly enough, most agents will only check 1 & 2 or just take the listing agent’s word only to be blindsided several months down the road. As real estate agents it is our obligation to protect our buyers and sellers alike. This includes saving them from a short sale that is bound to fail in which they would have invested months of time and in some cases spent $$$ on inspections and other related costs.

At the end of the day, a little homework upfront will not only save time, it may save the deal and your client’s hard earned money.

About Daniel Di Matteo

Realtor at CENTURY 21 Award, Daniel was Voted U-T San Diego’s Best Real Estate Agent in 2014. A Husband, Father, and most recently, accomplished Blog writer, which explains your visit today.