It’s been a long time coming, but the Phoenix real estate market is showing significant signs of improvement. Purchase prices are stabilizing, there are more qualified buyers and the number of foreclosures and short sales is decreasing. The term short sale refers to properties where the bank accepts a purchase price lower than the mortgage amount and forgives the remaining debt. It is much easier to purchase a home as a short sale than it is when it is officially in foreclosure. According to the Arizona Regional Multiple Listing service, there were only 1,181 short sales during March 2013 compared with 2,197 in March 2012. The success rate of short sales remains consistent, hovering right around 76 percent. Even though there are fewer short sales to choose from, there are still many solid investment opportunities that you can take advantage of. Here’s how.
Hire A Realtor Who Specializes In Short Sales
Time is of the essence when trying to purchase listings that are short sales. You don’t want to waste your time making offers on properties that aren’t going to get lender approval. An experienced Realtor can determine if the seller has taken the necessary steps to successfully sell their home as a short sale. This includes supplying the lender with required paperwork such as a hardship letter, bank statements and a broker’s price opinion. Many sellers don’t do this until they have a signed offer in hand. The chances of a bank accepting a short sale at this point are not favorable and you will be wasting your time waiting to find out if the offer is accepted.
Don’t Make An Offer Without Previewing The Property
Even if you have hired a Realtor whom you trust implicitly, you should never make an offer on a property listed as a short sale without previewing the property first. It is important that you are comfortable with the condition of the home—especially since many short-sales are listed “as-is.” If possible, it is also a good idea to meet the sellers when previewing the property so that you can get a feel for their state of mind and vice versa. Unfortunately, sometimes sellers become bitter or enraged that they are being forced to sell their home and may vandalize or strip the home.
Make A Fair Offer
Banks will be more likely to take you seriously if you can prove that you are a qualified candidate and make a fair offer. Before you start looking at properties, take the time to get pre-qualified. The more money you have to put towards a down payment, the better. Lenders will typically accept an offer that nets a minimum of 82 percent of the current fair market value and forgive the remaining debt. You may need to increase the offer based on the quality of the home as well as comparable home sales. Many people make the mistake of presenting a low-ball offer trying to get a great deal. Saving 18 percent on the purchase of a home can still save you a substantial amount of money. As of February 2013, the average purchase price of a home in the Phoenix metro area was $162,300; 18 percent of that is $29,214!
Allow Plenty Of Time
The short sale process is a long, tedious, paper-intensive process. Once a signed offer is presented to the lender it can take anywhere from two to four months for the offer to be accepted, rejected or countered. If you are purchasing the home as a primary residence you need to be prepared for that fact that you might need to find alternate living arrangements for a few months. If you are purchasing it as an investment property, you won’t be generating income right away.