BlackEnterprise.com talked with Kevin Riles, real estate broker and author of 40 Acres & a Mule: The African American Guide to Building Wealth Through Real Estate (Kevin Riles; $15.95) and David Wood
, managing partner at Conyers, Georgia-based Wood & Wood L.L.P., about key things to know, no matter what side of the deal you’re on:Tips for Buyers
Be patient. Short sales can take at least 90 days to close. “So if you are in a hurry to close and move into your home, don’t purchase a short sale,†Riles says. Wood urges patience as well, adding that oftentimes a buyer will be getting the property for a great price as a result.
Be pre-approved, not pre-qualified. “Pre-approval means your file has been reviewed by an underwriter and all credit conditions have been met,†Riles says. “You need this so that when the short sale is approved, you are ready to move fast.”
Work with an experienced buyers’ agent. Because a short sale can involve quite a few intricacies, you don’t want this to be an agent’s first short sale.
Lack of communication from the seller or sellers’ agent should raise an eyebrow. “This probably means they have not heard anything themselves,†Riles says. “You must be in constant contact with the seller.â€
Be prepared for last-minute changes at closing.
“Usually the closing attorney is seeking approvals from the seller’s lender, the buyer’s lender, and of course the parties in the deal,†says Wood. “With so many people to appease, oftentimes the figures will change frequently as you approach closing.â€The terms of the contract may be restricted by the seller’s lender. “[For instance], the seller’s lender may only wish to allow the seller to pay a certain sum of the closing costs, while the seller and buyer may have negotiated [a deal] where the seller would pay more of the closing costs,†says Wood. “Ultimately, the seller’s lender will trump the terms of the agreement.â€
Tips for Sellers
Don’t assume you need a short sale. Talk to a real estate agent and find out what your home is worth. “If you have enough equity, try to sell your home on the open market,†Riles advises.
Open the lines of communication early. Once you know you need to pursue a short sale, be sure you are communicating with your lender on a regular basis. “This can mean the difference between foreclosure and getting your sale done,†Riles says.
Have your documentation ready. You will need several documents including tax returns, pay stubs, bank statements, and other important forms, and they must have the proper signatures.
Be prepared for last-minute changes at closing. “Usually the closing attorney is seeking approvals from the seller’s lender, the buyer’s lender, and of course the parties in the deal,†says Wood. “With so many people to appease, oftentimes the figures will change frequently as you approach closing.â€
Resources
National Association of Realtors’ Field Guide to Short Sales
HUD Guide to Avoiding Foreclosure
Making Home Affordable Program
Freddie Mac Guide to Avoid Foreclosure
WEALTH FOR LIFE PRINCIPLES
1. I Will Live Within My Means
2. I Will Maximize My Income Potential Through Education and Training
3. I Will Effectively Manage My Budget, Credit, Debt, and Tax Obligations
4. I Will Save At Least 10% of My Income
5. I Will Use Homeownership as a Foundation For Building Wealth
6. I Will Devise An Investment Plan For My Retirement Needs And Childrens’ Education
7. I Will Ensure That My Entire Family Adheres To Sensible Money Management Principles
8. I Will Support the Creation and Growth of Minority-Owned Businesses
9. I Will Guarantee My Wealth Is Passed On To Future Generations Through Proper Insurance And Estate Planning
10. I Will Strengthen My Community Through Philanthropy
For more on short sales and buying distressed properties, check out the September 2009 issue of Black Enterprise magazine.