Short Sales-Bring It On!
What an opportunity! Hundreds maybe even Thousands of short sale property on the market waiting to be picked up by someone who only needs to get the mortgage. Simply make an offer, any offer, and the real estate agent is required to deliver each offer to the seller, you will reel in something that’s workable and may provide positive cash flow. Here are a couple of secrets that you should memorize to get the best price:
1.Make low ball offers! Offer 20% or more less than the anticipated price and wait for the bank to select your contract. You are not obligated, based upon the confusing multi-faceted terms the banks insist upon, to purchase anything once the bank has tentatively accepted you. If you think you over paid it’s a breeze to get out even without a home inspection.
2.Be prepared to wait! The bank sometimes wants a list of 4 or more buyers before they ever land on one. The process can take 3-6 months.
3.Banks will typically negotiate a reduction in price for “significant material defects”. Asbestos, molds, and major roof problems are defects the banks typically will reduce the price on even after you’ve negotiated your contract. This requires an inspection.
4.Hire an inspector who is willing to interpret problems, not just point them out. Your inspector MUST include budget figures for repairs and interpret problems for you to have an understanding as to whether they are huge problems or smaller ones, long term or immediate.
5.If you can’t qualify for a second mortgage why not put the title in your adult child’s name and fund the reduced down payment yourself? The bank wanted 20% down from my friend but when his 26 year old working son was placed on the mortgage and title they got in for 10% with a mortgage less than 6%. Because the property was a 3-flat this did not ruin the young mans opportunity for the $8,000 federal rebate.
Don’t forget to negotiate the real estate agent’s commission down to a point where you can deal with it and consider making multiple offers on short sale properties. The banks will be moving on lots of distressed properties this winter and when you find one, hire a tough home inspector that will budget out all of your rehab expenses. If you can afford it, buy as many as you can! It doesn’t get better than now!