Short Sale In New Jersey – 5 Tips You Should Know Before You Make An Offer

Written by on January 19, 2012 in New Jersey Mortgage News - No comments

5 things you should (or absolutely shouldn’t) do when buying a short sale in New Jersey.

A recent evaluation of the New Jersey housing market revealed that in many areas short sale listings are at an all time high, and in some cases make up 50% of the market.  Buying a short sale can be tricky, you’re under contract and your given a firm “maybe” from your realtor, so what should and shouldn’t you do?

Get your financing (mortgage) ready!

Probably the best advice is to get your mortgage ready.  When banks issue approvals they often do so with very little time for you to close.  New Jersey mortgage financing takes a little while these days, you should be working with your lender to clear loan conditions while you are waiting to hear back from the bank.  Pay particular attention to the expiration dates of your mortgage commitment and rate locks.  The best rates in New Jersey will always be shorter term locks, make sure your lender will work on your file BEFORE you are locked to ensure that they are a good fit for your short sale mortgage needs.

Understand your situation.

Read your contract and the short sale addendum, this should be done during the attorney review period and not after!  Have your attorney explain the sections, specifically any “As-Is” provisions, house inspection clauses, and the timing of buyer responsibilities.  Are you responsible for a mortgage commitment 30 days from singing the contract or 30 days from the banks approval?  Do your home inspection rights expire 10 days after the banks approval or the end of attorney review?

Don’t buy your new furniture unless they can delay shipping and you are comfortable with the cancellation costs.

Just because you are under contract does not mean you are buying this house!  Several things can happen at this point that could cause you to not buy the home.  The bank can flatly decline the short sale request, the bank can counter offer and ask that you increase your price (they can also ask that the realtors lower their commissions, or that the seller contributes funds into the transaction), or the home could be foreclosed on before the bank issues a decision (only if the sellers are not making any payments).

Work out a plan for your current residence.

Whether you are renting, own your home, or are living with family you need to work on keeping those circumstances flexible.  This issue is why many chose to avoid short sales; there is just no telling when the bank will respond to your offer.  The biggest challenges are for buyers that are putting their homes on the market.  They need to either wait for the approval and face the potential of dual housing payments or find a buyer that is willing to be very flexible.  If you are renting, then make sure you talk to your landlord about your lease expiration.

Make sure that someone is actively working on the short sale approval. 

Most short sales need to be coordinated by an attorney specializing in these transactions that the seller hires.  The bank will pay these attorneys a fee for helping to organize the process, if your seller isn’t using an attorney like this then you could be in for a long haul.  You should make sure that the listing agent has communicated to your real estate agent who will be contacting the bank to make sure that all paperwork was sent in to their specifications.  Banks don’t proactively ask for follow up documentation, so if no one is calling, your offer will likely sit with no activity.

Short sales represent a very large portion of the New Jersey real estate market, and are a great home buying opportunity.  Being careful, prepared, and informed can help you cash in on these great deals.

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