Choosing a Buyers Agent and Lender when purchasing a distressed property15 May Monica Breckenridge
Are you a buyer in the market to purchase a short sale? If so, whether you just want to find a good deal on a home or short sales make up the majority of the affordable inventory in your market, we want you to understand the importance of selecting both a qualified buyer's agent and lender to help you get through the short sale buying process.
The role of your buyer's agent is not just to find you a home that meets your needs. If you are in the market to purchase a short sale, your agent should also be prepared to educate you in the short sale process, establish proper expectations so you know what to expect, and be the communication link between your lender and the listing agent throughout the short sale process. If your buyer's agent is not familiar with short sales, they will not be able to do this for you. Your agent needs to be your liaison and keep you informed during the entire short sale transaction.
Additionally, it is just as important to find a lender that understands the short sale process! The role of your lender is more than just qualifying you for a mortgage loan you can afford. They need to understand the short sale process, the timing of the different phases and be able to get your financing completed on time so you can close before the short sale approval expires. Lenders who are familiar with the short sale process tend to engage in the loan transaction differently than a lender who sees the transaction as simply a lengthy process, sits back, and waits until short sale approval is received. If you have a loan officer that is not proactive in the process, they may prequalify you for a purchase price but when you are down to the wire, they may not be able to get your financing completed on time to close. Those with more short sale experience tend to be engaged in both your loan approval and the short sale process so when short sale is approved they are ready to close!
A good buyer's agent will stay in touch with your lender and the listing agent and keep you informed as to the status of the short sale. A good lender will work with you and your agent throughout the short sale process as well. When there is good communication between all parties and everyone is on the same page, getting a short sale to the closing table is not difficult. If the right communication is not there, things can fall through the cracks and put the transaction in jeopardy. While many people blame on the selling lenders for short sales not going through, the buyer's lender is oftentimes the culprit.
When you deal with a mortgage lender well versed in the short sale arena, both buyers and sellers can be more comfortable knowing the transaction has a better chance of reaching the closing table. There are several elements to consider when selecting the right loan originator for your needs.
1. If the buyer/borrower is interested in purchasing a short sale or distressed property, the loan officer needs to understand the short sale process and the challenges both the buyer and seller face with requirements, regulations and strict timelines.
2. An experienced loan officer will know the importance of a pre-approval letter over a pre-qualification letter. A complete short sale package requires either a pre-qualification or pre-approval letter for the buyer if they are securing a mortgage to purchase the property. A loan originator who understands the short sale process will take the time to do a full mortgage application, collect proof of income, proof of debts and assets, and put the buyer through the appropriate automated underwriting process so a pre-approval can be issued. Because short sales take time, many inexperienced loan officers will take an application and issue a pre-qualification letter on verbal information provided by the buyer. The buyer who was preapproved will be the buyer most likely to reach the closing table on time. There is a lot that goes on in the underwriting and approval process of obtaining a mortgage loan. Loan officers who wait until short sale approval is received oftentimes cannot get the job done in time in time and buyers do not make it to the closing table in time to meet the requirements of the short sale approval. When short sale approvals are issued, they have an expiration date that is generally within 30 days of the approval date.
3. Appraisals determine whether the property is acceptable collateral for the loan. In retail sales transactions, the lender generally orders the appraisal right away because they have confidence the transaction will close. In a short sale transaction, many lenders wait to order the appraisal until short sale approval is obtained. This way no one is out-of-pocket any money in the event the short sale is not approved. Unfortunately, waiting until this time to order the appraisal can put risk on the transaction because of the time it takes to complete the appraisal and then process the loan through underwriting. Oftentimes the loan process cannot be completed before the short sale approval expires. Another benefit to having the appraisal done prior to short sale approval is that the appraisal can be used to combat any counter offer the short sale lender may come back with. The buyer's appraisal can do wonders in justifying the current offer and is a great value dispute tool with the selling bank.
4. The timeframe to close a standard retail sale can average about 30 - 60 days. This is standard industry knowledge and the parties involved rarely question the timeframe. A short sale, however, can take upwards of 90-120 days. Because of the lengthy short sale process, it is important for both the buyer's agent and the buyer's lender to work together to keep the buyer engaged in the transaction. Communication is very important. The loan officer can keep the buyer engaged by staying in touch with the buyer and requesting updated financials to keep their loan file up-to-date. The buyer's agent should seek updates from the listing agent on the status of the short sale approval and provide continuous feedback to both the buyer and their lender. No news is not always good news with buyers. If a buyer is not given a reason to stay engaged in the transaction they will lose interest and pursue other properties. This results in buyers terminating the contract and the lenders losing time and money.
If you are a buyer who wants to take advantage of the benefits in purchasing a short sale property, it is very important that you go forward with the people who can best support your interests throughout the process. It is very important to have a buyer's agent who understands what you are looking for in a property and will be your liaison to keep you informed throughout the entire process. It is just as important to work with a lender who understands the short sale process and can successfully get you and your financing to the closing table before the expiration of the short sale approval.
At Pink Realty, we are very aware of what is needed and what happens on both sides of the transaction. We are short sale experts and specialize in all facets of the short sales. If you have any questions regarding the short sale process, are looking to sell your home as a short sale, are in the market to purchase a short sale, or you need a good recommendation for a lender, call us. Call the experts! We can help. Whether you are a buyer or a seller, call the experts to get your questions answered and be connected with the people who can help you get it done!