Before you can ask yourself, “Should I buy a short sale in Phoenix, AZ?” we need to discuss the different kinds of short sales we have here in Phoenix, first.
By the way, when I say, “Phoenix, AZ,” you know I mean Phoenix and all of its suburbs (Scottsdale, Fountain Hills, Paradise Valley, Tempe, Chandler, Ahwatukee, Mesa, Gilbert, etc.) too, right?
That’s right, we have three distinctly different kinds of short sales listed on our Phoenix area MLS (Multiple Listing System). In this post, I will list each of them along with an overview of how they compare and contrast to each other. With this information, you should have a better idea of the complexities of buying a short sale, but you may still have questions. If you do, please feel free to contact us or call us!
1. Short Sale Approval Required – This is the most common type of short sale here. As of the writing of this post, they accounted for 14% of all the active listings, and 87% of all the active short sale listings. When you see this status, it usually means the seller has not gotten formal permission – often called “short sale approval” – from his/her lender(s) to sell the listing yet. You can make an offer on the listing, but it will have to be presented to the seller’s lender(s) for approval, and this process may take three to six months or longer. We, at The Hill Group, have seen the short sale approval process take as little as one month and as long as nearly 13 months. No two short sales are completely alike, though, so one of the hardest things to do in real estate is predict how long your short sale approval process will take.
2. Previously Approved Short Sale – This is a very uncommon type of short sale in the Phoenix Metro Area. As of the writing of this post, previously approved short sales accounted for less than 1% of all active listings, and roughly 2% of all active short sale listings. They are hard to find, but if found, your offer on one may be approved more quickly than I mentioned in the scenario above. This is because, typically, previously approved short sales have already been granted approval by the necessary lender(s) sometime in the past. The reason one would still be on the market today is often because the approval on it has expired, or the approval was granted at a price above the current list price of the home. You may still have to wait one or two months for the lender(s) to consider your offer, but if the lender(s) agree it reflects the fair market value of the home today, you may have yourself a deal!
3. Lender Approved Short Sale – If you are going to pursue short sales, you need to know these are usually the quickest to close. However, as of the writing of this post, they also accounted for less than 1% of all the active listings, and just 3% of all the active short sale listings. Here is the reason why. In order to be given the status of Lender Approved Short Sale, typically, the home seller has already submitted all of the documents/information his/her lender(s) requested, and the lien holder(s) of the property have already agreed to a certain price under certain terms. If you are willing to make an offer on that home at that price under those terms, you could have approval of your offer within two to four weeks.
For as many differences as there are between these three kinds of short sales, there are similarities among them, too. Before you can purchase any short sale in Arizona, you will likely be asked to sign a Short Sale Addendum. In the Short Sale Addendum, the home buyer agrees to waive the seller’s warranties set forth in the Arizona Real Estate Purchase Contract, cooperate with the seller’s creditor(s), sign any additional addendum(a) required by the seller’s creditor(s), and to close escrow within 30 days of the approval of the short sale.
If you would like a copy of the Short Sale Addendum I mentioned above, or to discuss buying a short sale in the Phoenix Metro Area more, post a comment below or contact us today!