Hilton Head Island Real Estate Short Sales

Hilton Head Island, SC Short Sale Listings

We are sure that by now many of you have heard the term "short sale". It is being used widely throughout the real estate industry and is popping up everywhere in the Hilton Head Island real estate market. In fact, "short sale transactions" are dominating many real estate markets throughout the US. By definition, a short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. The situation often occurs when borrowers cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

Short sales are very popular with investors because they represent an opportunity to buy a property for less than its market value. However, if you have been monitoring the Hilton Head real estate market and are considering purchasing a "short sale" property, here are a few things that you need to be aware of.

Even though all transactions are negotiated between the purchaser and the seller, at the end of the day the lender has the final say. And, depending on which lender holds the note, the lender's response time on the negotiated transaction can take months to come to fruition - in some cases, as many as six months to close. Much of the time, delays are due to the sheer number of "short sale" transactions these lenders are receiving on a daily basis. It is sort of "hurry up and wait", so patience is a virtue when dealing with these "short sales".

Due to the sellers' financial condition a buyer should be prepared to come to closing expecting to pay additional expenses. These expenses may be the result of delinquent P.O.A (Property Owner Association) fees, back liens, termite inspections, customary repairs that are usually the responsibility of the seller, etc. Also, the appraisal could cause another problem. If the property is in a declining area and the deal drags on while the values in that area continue to decline, the value of the home as reflected in an appraisal may drop below your offer to purchase. Most lenders are adamant about sticking to the original offer, so the buyer would have two choices: (1) take the property at above current market value, or (2) walk away from the deal. The downside to walking away is that this would typically come late in the process and after the purchaser has had his earnest monies tied up for some time. Also, the purchaser would have incurred expenses such as home inspections, attorney's fees, title search, etc. So, this is certainly something to be aware of.

A bank owned (R.E.O) property is another term that has popped up in almost all area real estate markets. The terms R.E.O. or "Real Estate Owned" generally refer to real estate parcels that were repossessed during the foreclosure process and did not sell to another party at the foreclosure auction. They can be just as attractive as a short sale and purchased below market value, but without the delays or the risk of additional expenses. The bank will clear any defects in the title before putting it on the market for sale. When you make an offer on a bank owned property, you will most likely get a response from the bank within a week if the offer is accepted, and typically you can close on the property within 30 days. However, the condition of bank owned properties can be an issue because they have been sitting vacant. A short sale property is usually in better condition because in most cases, it is still owner occupied during the transaction process.