Chicago Short Sale Real Estate Market
Short sales are the largest growing segment of real estate sales within the last two years. When buying a short sale, you may have to not only try to satisfy the original mortgage lender, but any secondary liens as well. Multiple levels of approvals and conditions are very common with short sales. Junior liens — such as second mortgages, home equity lenders, and HOA (special assessment liens) — may need to approve this type of real estate transaction, which is why (unfortunately) short sale deals have a high failure rate and often do not close on time to save homeowners from foreclosure when they are not handled by a knowledgeable and experienced professional. The best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation are real estate agents that have years of direct experience dealing with short sales.
Our Short Sale Experience in Chicago
Ted Guarnero has years of experience with short sales; according to Ted: "many potential buyers are attracted to short sales because they are priced under market value, but short sales are not for everybody. I complete a full short sale package for all of my short sale prospects before moving forward. Below is hopefully the very basic information, the pros and cons of the short sale process."
NOTE: YOU ARE NOT GOING TO STEAL A SHORT SALE IN CHICAGO. So, unless it's a home that has some great features that cannot be duplicated, don't fall in love with it!
- Fannie Mae and Freddie Mac will accept 85 to 90 percent of the fair market values in a short sale of the BPO.
- HUD will accept as low as 82 percent in a short sale situation.
- The seller of the property can in no way profit from a short sale.
- These numbers include back taxes and closing costs that the bank will have to pay.
Avoid Foreclosure in Chicago. Learn About Short Sales!
For the home owner and seller of property, a short sale will avoid foreclosure. The negative impact on their credit history can be the difference of owning a home again and being a life-long renter. It must be mentioned that unless the remaining balance is indicated on an acceptance offer as extinguished, the homeowner may still owe the short money on the transaction. Although a short sale is faster than a foreclosure, it will still take a considerably longer time to complete than a regular home sale, since a buyer is not negotiating with the home seller, but rather the loss mitigation department of the lender.
To learn more about Chicago foreclosures and to view foreclosures for sale in Chicago, click here.
Short Sale Advantages in Chicago
Pro: Buyers Often Get Property For Less
As a buyer, you may get a property in Chicago for less than market value, or at least for a lower price than found in the neighborhood on similar properties. The bank or mortgage lender will typically determine the property's worth from a Broker Price Opinion (BPO) or through an independent appraisal.
Disadvantages to a Short Sale in Chicago
Con: Closing Can Take Longer
If buying a short sale property in Chicago, a buyer must be aware that short sales take a much longer time to close than a standard sale, and the buyer should be prepared for 2-6 months before closing. According to Ted Guarnero, an expert in short sales, "you are probably looking at 6-8 weeks to even hear back about the acceptance of your offer, then a few more months between offer acceptance and closing." Adding a second mortgage will delay this process as well.
Con: Dealing Directly with a Bank/Mortgage Lender
Dealing with the bank or mortgage lender is considerably different to dealing with a homeowner. Some of the differences that individuals must account for when dealing with a bank as a short seller are:
- There is NO urgency/need for the bank to sell the property — banks are often overloaded with offers — and not all are reasonable.
- Even if you offer the homeowner and bank full short sale price, the bank may still reject your offer for a variety of reasons. The most common reason is that the listing agent may have listed the home without knowing if the seller was qualified to do a short sale on their home in the first place.
- The owner is the one that must accept or deny the offer to purchase first (NOT the bank).
- The bank accepting the short sale is contingent with the seller, NOT THE BUYER.
- Once you submit an offer, you are locked into that price and contract. In today's real estate market with sliding prices, if the bank takes several months to respond to your offer, you may be paying more than current market value.
Con: Short Sales Can Require More Work For You
To make a case for the short sale, the seller needs to compile paperwork to prove to the lender that the homeowner qualifies for a short sale. Since the average layperson is not familiar with the many nuances and legalities of most real estate transactions, including short sales, it's important to work with a REALTOR® like Ted Guarnero who specializes in this area and can save prospective buyers a lot of aggravation, time, and money. Ted says you will need to present the following to a lender for any short sale approval:
- Purchase agreement
- List of repairs with bid quotes
- Photos of problems
- Seller's hardship letter
- HUD-1 Net Sheet
- Sellers Financial Information — tax returns, etc.
- Your formal offer with a time limit for acceptance
- This is only a small part of the list and we can show you everything that is needed
Obviously, this is a lot of work involved. This is why it's important now more than ever that you hire a real estate agent and an attorney who is familiar with short sales and the complexity of them.
Because short sales are more complicated than regular sales, it is imperative that you choose an agent to represent you who has experience in short sales. Contact Ted Guarnero for a list of short sale properties. Let Ted's 25 years of experience handle negotiations for you, and make sure that your best interests are protected throughout what can be a complicated process.