When is earnest money due in a short sale

Known as real estate owned, REO properties occur when a home has been foreclosed on and the bank has taken back possession. The difference with a short sale is the homeowner is selling the property, but the lender has final approval on any offers made. In this situation, the bank is the lender, not the seller, and must approve the offer and sale. This means that all parties involved must agree to accept less than is owed on the property.

Herein lies the complexity of short sale transactions. More often than now, short sale homes are priced low for the purpose of attracting multiple offers, and investors need to be competitive when making short sale offers. The next step to making short sale offers is understanding the contract.

The last aspect investors need to consider when making short sale offers is the wait. The waiting game is the biggest drawback for many investors, as this process can take months after an offer has been submitted.

Attend our FREE online real estate class to learn how to fund real estate deals with little to no money of your own. To succeed in getting short sale offers approved, investors need to approach the i r offer strategically.

When making short sale offers, the following tips will help investors get their offers accepted. Simply put, an earnest money deposit reveals how serious a buyer is about a property. This will speak volumes as a serious buyer. In addition, real estate investors should put their earnest money deposit into a trust account once the short sale has been approved. Another important aspect investors should consider is their pre-approval letter. Sellers are more likely to consider offers made by investors who can show they are financially capable of closing the transaction.

Due diligence is the cornerstone of any quality real estate deal , and investors need to do their homework when it comes to making short sale offers. This includes checking comparable sales and calling listing agents before making an offer. Short sale listings are typically priced under market value to entice potential investor. In some cases, banks have been known to approve short sales priced between five and 10 percent under market, but that depends on the property and area.

Another aspect of due diligence is calling the listing agent. This will not only reveal what the seller is looking to recoup, but it will provide insight into how many offers the property has received, including whether the price has gone up or down. Before making any short sale offers, investors need to know whether the short sale is lender approved. This means the seller has defaulted on the loan, and the bank has already agreed to the short sale. While many homes are listed as short sales, there is no guarantee the transaction will be completed as one.

As an investor, take the time to ensure the short sale is approved by the lender before submitting an offer. The waiting game is the number one drawback for real estate investors when making short sale offers. While some may be approved within a couple weeks, the majority of short sale offers take months to be approved or rejected — sometimes longer. To qualify for a short sale, a homeowner must also prove financial hardship.

Frank Nothaft is chief economist for CoreLogic , a company that tracks property markets and mortgages. So today there are way fewer opportunities than there once were for savvy buyers to take advantage of short sales. For determined buyers, there could still be good deals to be found. Short sales are often given lower priority than traditional sales. Sometimes it takes weeks or even months for a short sale offer to be accepted or rejected.

Or the lender may make a counteroffer, in which case you can refuse, accept, or counter back — which involves restarting the process from square one. The original homeowner may have applied, unsuccessfully, for loan modification programs. To avoid losing the home through foreclosure, the owner successfully appealed to the lender for a short sale transaction. But in doing so, he or she lost control of the selling process and any ability to ever reclaim the down payment or any additional equity.

Other times, the lender may pursue a deficiency judgment against the borrower through the courts in an effort to recover the shortfall. A homeowner who asks for a short sale should try to get a waiver to prevent the lender from trying to recover the lost money in the future. After a foreclosure, though, FHA requires a three-year waiting period before buying another home.

Conventional loans backed by Freddie Mac and Fannie Mae require a seven-year wait for borrowers with a foreclosure on their credit report. For now, the days of easy pickings from short sales are over. Homes in pre-foreclosure and foreclosed bargains are getting harder to find, too.

True, you can still find very profitable deals with a short sale. But you have to work harder and smarter to hunt them down. That step, at least, you can start right here. Verify your new rate Nov 11th, How Soon Can I Refinance? How Often Can I Refinance? It Is Worth Refinancing For 0.

Talk to a Lender: How to buy a short sale home. Pete Gerardo The Mortgage Reports contributor. January 14, - 11 min read. How does a short sale work? The benefit of buying a short sale is that you could find a home at a reduced price. Check your mortgage options Nov 11th, In this article Skip to… What is a short sale? The short sale process How long does a short sale take?

Obstacles during the short sale process Who should buy a short sale? Pros and cons of buying a short sale What is a short sale? The short sale process The short sale process is a lot like buying a home off the market.

Take the next step in protecting your dream by exploring our homeowners insurance options or reach out to an American Family Insurance agent to get your quote today. Have more questions about the home buying process? Want to spruce up your apartment without losing your security deposit?

Learn about these DIY projects for renters that work for small budgets and spaces. At Home. What Is Earnest Money? When Is Earnest Money Due? Back to top Earnest Money Factors to Consider There are a lot of market factors to review when making an offer, so getting a feel for how much earnest money you should put down is key.

Market trends Depending on the region, homes may only be on the market for a few days before offers are even entertained. Let your earnest money do the talking If you really want to purchase a given home, it may be wise to aim high. Back to top Is Earnest Money Refundable? Remember your contingencies Always keep in mind the contingencies you and the seller put in place.

Stick to the timeline Delayed earnest money refunds are most commonly the result of missed deadlines. Back to top Gain Protection for What Matters Most Buying a home may take a lot of patience, dedication and research, but few milestones in life can feel as rewarding. How would you rate this article?

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