Short sales draw a lot of interest from buyers for a variety of reasons, not the least of which is the lower initial price tag that they carry. The theme in this post revolves around the word “initial” in the last sentence because no matter what price a short sale is first listed at, the final sale always has to be approved by the seller’s lender. For those of you who might not be familiar with short sales, a short sale occurs when a home owner owes more money to their lender than the home is worth, and the lender agrees to allow the owner to sell the home at a loss in lieu of foreclosing on the owner. This will be the first post in a two-part blog series about challenges to expect when purchasing short sales.
I have a buyer client who has been waiting almost three months for her short sale to be approved (three months is not at all uncommon for short sales – some take as long as six months or more to be approved). We heard word from the listing agent the other day that progress is being made, so that’s the good news. However, we also heard some potentially bad news…
First, a little background: my client wrote a contract for $200,000 in October 2013 on a 1BR/1BA condo in Alexandria. The listing agent told me that the negotiator on the short sale has been in contact with the bank and that they’ve had a substantive dialogue, and that part of the conversation has been about the value of the property. Since my client wrote that contract, sales prices of 1BR/1BA condos in the condo community have increased substantially. The three most recent closings ranged from $212,000 to $215,000. We knew that her contract price was below market value, (as short sales most often are), but at the time she wrote the contract, it was probably only $5,000 to $8,000 below market value. While this is good news for her regarding future property value appreciation and resale potential of her new condo, the bank that needs to approve the short sale will likely take notice of these increased sales prices. Basically, the bank might factor this data in to their decision on what price to accept for the property.
To read the second part of this two-part blog series on challenges to expect when purchasing short sales, click here.
If you’re considering buying real estate in Northern Virginia, call me at 703-462-0700 so I can hear about what you’re looking for and help you find the right property. I’m an experienced buyer agent who grew up in this area and knows the Northern Virginia real estate market very well. If you’re looking to buy a short sale in Northern Virginia, you owe it to yourself to consult with an agent who is experienced at helping buyers through this process, so give me a call.
If you’re thinking of selling your Northern Virginia home, contact me so I can give you a no hassle, over-the-phone comparative market analysis of your property and the surrounding neighborhood. This will give you a good indication of what your Northern Virginia property is worth.