“BOM” is shorthand for Back on Market, and several properties earned this status over the past week. Three of them started off as short sales, meaning that their sellers could very possibly be foreclosed upon if they’re unable to find new buyers.
I point this out because it’s key for buyers who make offers on short sales to do their homework up front, and understand the full scope of the short sale process.
The three BOM short sale properties include the one above at 643 5th Avenue—a 3BR/1BA, 1700-square foot single-family home in the Inner Richmond listed at $895,000. There’s also a house on 22nd and Church in Noe Valley for $720,000 that needs some work, and a 2BR/1BA starter home in Sunnyside for $529,000.
Short sales are being approved much more easily in 2011, but buyers need to know that when they make an offer on a property that’s being sold in this manner, they will have to wait around for weeks or months to find out whether the lender will approve the sale. It’s expected that a buyer making an offer on a short sale home will do so in good faith, and won’t flake after a month passes without a response from the bank. This does sometimes mean missing other opportunities that come on the market in the interim.
And if the lender(s) respond with a counter offer, buyers should not be surprised. The reality of short sales is that they aren’t necessarily “deals;” lenders are taking a loss to begin with, and they do their homework with respect to current market values. Short sale properties are typically listed at lower prices to attract interest; it’s up to all parties involved to strategize so that the lender accepts the contract. That might mean going through a couple counter offers. A good listing agent will have a strong sense for what the lender will accept, so by the time a buyer’s offer is finally reviewed, the price should be very close to acceptable.
Buyers need to do as much reconnaissance work as possible with the guidance of their agent before submitting an offer and making a contractual commitment. Disclosures can sometimes be very limited (more so with condos, as sellers may not want to pull together HOA documents if they will be charged for them). Your agent should be able to guide you in researching the permit history and in the case of a condo, HOA health.
It may be worth it to have a walkthrough with a general contractor so you can get an idea about how much money you may end up needing to spend on improvements (more relevant for single-family homes). For example, the 22nd Street property I mentioned has a brick foundation and a city easement between the property and train tracks nearby. In this case, it’d be really important to attain a comfort level with those details prior to submitting an offer.
Once the lender has accepted your offer, the escrow can close in normal fashion (of course, most lenders respond with a two-week required close, but that’s another story). And yes, unexpected events can occur to throw things off track. But if you do your due diligence up front and work with an experienced buyer agent who’s closed short sales, your short sale can be a success without a lot of stress.