What are The Most Crucial Components when Buying a Short Sale or Foreclosure here in Goleta, Santa Barbara and Carpinteria?
The obvious lure from a buyer's perspective of both short sales and REO (real estate owned) properties is the chance to get a property at a discounted price. Here in Carpinteria, Goleta and Santa Barbara, this opportunity does exists, but not without its pitfalls. The best way to deal with these pitfalls is to get educated about the most common "issues/nightmares" that come with these deals. Although there are many factors to consider...the biggest for most tends to be TIME.
TIME - The most crucial asset we have in life. When dealing with both short sales and foreclosures here in the Santa Barbara area, time is of the essence. When it comes to any type of distressed property, the transaction will most likely take anywhere from a few weeks to a few months (bank owned) longer than a normal sale. With the case of short sales, this can be 3-8 months longer...also unfortunately without even the guarantee that you will close on the property. The reasons for this are numerous from the extra signatures, to supervisor-level approvals, to apathy on the banks end as well as investor involvement required to get the deal done. Banks 100% do not have/show the same sense of urgency that individual home sellers do. One of the biggest issues with this "time suck" is that if you are getting a loan, your terms are usually only good and your rate is usually only locked for 45 days. The key for you if you go the route of looking to buy any distressed property is simply "Expectation Management". Other Key Factors seem to be:
- Banks generally will not take "low ball" offers. Banks owe their shareholders and investors a duty to get as much as they can for these properties. Bank owned is not code for "I can get this at a fraction of what it is worth." Banks will price homes at or just below the fair market value and if they do not sell they will slowly reduce the price, not take some far fetched low ball offer. You can and will waste a lot of time, spin a lot of wheels and lose out on a lot of properties making low ball offer after low ball offer on distressed homes.
- Last minute cancellations or extensions. Distressed property transactions have an uncanny way of being delayed at the last minute or never going through at all. Things just happen and I could give numerous ludicrous examples.
- The mystery of it all. When you submit an offer on a normal home, you are likely to know what the outcome will be within a day or two and sometimes even hours. If things happen to take longer there is usually a normal reason and you know of the reason. With REO's and short sales, you live in a mystery sphere for sometime. Also, no amount of your agent calling, pleading, prodding or nudging will push things further along in getting you the information you need.
- Double standards. In normal sales, both the buyer and the seller are obligated to meet various time lines and you will be informed of these by your agent. Disclosures delivered and returned on a certain date, home inspection and contingency removal on a certain date, loan completed on a certain date etc. With REO's and short sales, buyers are often dismayed to find that while the bank has taken weeks or months to sign or handle its side of the deal, you will then be expected to handle many things on your end in just a few days. Also if it is not done properly and you have to go back to the bank, you essentially start over and cost yourself some more time and frustration.
These are just some points to keep in mind. In no way am I trying to persuade anyone either way on whether to buy or not to buy a distressed property. Information is key and the simple reality is that you as a buyer have to be patient and expect delays, frustrations etc. if you go the route of distressed properties.
For information on Real Estate here in Santa Barbara, Montecito and/or our surrounding areas, as well as any other aspects of life in our area, please don’t hesitate to contact Kevin Schmidtchen at Berkshire Hathaway.
Thank you for reading. I hope you find Santa Barbara Real Estate Voice informative. Please feel free to contact me or comment below with any thoughts.
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