Q: What is a short sale?

A: There are a lot of short sales out there in today's real estate market. A short sale means that a seller owes more on a property than they can sell it for in the current real estate market. Because they are asking the bank to take a loss on the property, they have to get special approval from their mortgage holder. The process can take a couple of weeks, but more likely a few months, depending on how many mortgage companies you are working with and also who they are.

Q: In a short sale, am I buying the home from the bank?

A: In a short sale the bank does not own the home. The seller still owns the home, so you are generally working with them directly as you would in a traditional sale. Once it is a bank-owned property, however, then you are working with the bank rather than the actual seller.

Q: How does a bank determine the price of a short sale?

A: The price that a bank will approve on a short sale is determined in a number of different ways. They usually have the listing agent and a 3rd party real estate agent complete what is called a BPO, or Broker Price Opinion, where they look at comparable sales that have happened recently to determine a price for that property. They also sometimes will hire an actual appraiser to give them a price for the home. They then combine those figures to determine the price that they will accept.

Q: The seller accepted my short sale offer of $300,000. The bank will approve it, right?

A: Even if a seller accepts your offer on a short sale at the list price or lower than the list price, that doesn't always mean that their bank will accept that price. Once the seller has accepted your offer, the package and your offer will be sent to the bank for review. At that point, the bank will have their BPOs completed, as well as any appraisals, and will determine if your price is, in fact, what the property should sell for. If they determine that your offer is too low, they can come back to you and ask for more money.

Q: How long do short sales take?

A: Oftentimes you won't hear back from the bank for at least a month, many times longer. The process does take quite a bit of time, and there are different factors that lengthen that time. If it is a pre-approved short sale price,  then the process can go much more quickly, but if the process has not been started and the price not yet approved, it can take a lot longer.

The post What is a short sale? – Ask an Agent appeared first on findwell Blog.

Q: What is earnest money?

A: Earnest money is a deposit that the buyer puts down when they make an offer on a home. It shows their good faith in purchasing the property and their intent to move forward with the contract.

There are several contingencies that we put in place to protect your earnest money, so that if you do need to back out of the contract for some reason, you have the ability to do so and keep your earnest money. If you were to back out of the contract without using a contingency or for some reason not specified in the contract, you would forfeit your earnest money to the seller.

Q: Is there a standard amount of earnest money that I need to deposit?

A: There is no standard amount of earnest money that you have to put down. If you are in a multiple offer situation, stronger earnest money always makes your offer a little bit more attractive. However, there is no amount that you have to put forth.

Usually we like to see around 1% (of the sale price) or more. Putting too little of earnest money down can make you look like less of a serious buyer.

Q: My realtor told me that 3% earnest money is standard. Is that true?

A: 3% is definitely a good earnest money deposit, but it is not always necessary to put down that much. It can also depend on the purchase price of the home that you are looking at as well. If it is a lower-priced home, sometimes 1% may not be quite enough, but there is no rule that says you have to put 3% down.

Q: What if I have to back out of the deal? How can I protect my earnest money?

A: We put several contingencies into the contract, contingencies like and inspection contingency, which allows you to have a home inspected and back out of the contract if you are unsatisfied for any reason. In that case, you would get your earnest money back. We put a financing contingency in place for you, so if you couldn't get a loan on the property, you can back out and get your earnest money back. There are several contingencies we can use to protect you throughout the process. However, if you back out not using a contingency or for no reason at all, once all of your contingencies have been satisfied, then you would stand to lose your earnest money to the seller.

Ask an Agent is a regular feature on the findwell blog where our real estate agents answer common questions from home buyers and home sellers. If you have a question that you'd like us to answer, drop us a line at agents@findwell.com.

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