I’ve heard that question a lot lately. Dreams of scoring a killer deal on an incredible home that would otherwise be out of your price range have attracted home buyers who might otherwise be sitting on the sidelines. Combine the promise of 2003-era (and before) pricing with historically low mortgage interest rates (between 3.75% & 3.95% as of this writing), and buying a home sounds like a great option for many.
In fact, the world-famous investor Warren Buffett just this week said he would buy a couple hundred thousand single family homes as an investment if it were practical.
So just what is a “short sale?” Basically, a short sale is when the owner of a home owes more on the loan than the home is worth and asks the lender to accept less than what is owed as a payoff to the loan. You can learn all you need to know about short sales here, but for this post I’ll stick to my recent experience in the San Diego market.
Chapter 1 – Downtown San Diego Condo
A buyer was looking in the 92101 area (downtown and Little Italy) and found a great 1-bedroom condo in a great complex. We made an offer that same day and waited to hear back. Since this one was priced very well for San Diego, it’s no surprise that we go beat out by an all-cash offer. In fact, there were two other all-cash offers on the table. With our financing (even with 20% down), we didn’t stand a chance.
Lesson learned: Jump on it while you can. We could have made an offer when this place was first on the market, but we instead waited for them to drop the price. Lately, I’ve encouraged my buyers to be ahead of that price drop, which has been a more successful approach. In this case, we’ll continue to hunt for that great deal, but will certainly pounce as soon as we see it.
Chapter 2 – North County San Diego
A buyer late last year was interested in finding a single family detached home in North San Diego County – specifically, Carlsbad. We looked at several homes and finally found one that was a perfect fit for their growing family. We made a quick offer the very night we saw the property in person, and got a fast response from the seller. The offer was $10k less than the list price, and we later learned that there were several other offers in a range that was only about $10k less than where we were.
Lesson learned: You’ve still got to pay for the really good ones. I’m not saying you have to over-pay – only that when you see a property in great condition in a great neighborhood, don’t be surprised if your lowball offer gets rejected. The San Diego real estate market is still somewhat tight, and there are a lot of people who have been waiting in the wings for quite some time. If you see a home you love, step up and make a solid offer.
Chapter 3 – North County San Diego
I had another buyer interested in a home in South Escondido that was on a 1+ acre lot, huge yard, sparkling pool, and the home itself was in great shape. Again, I encouraged them to make an offer slightly above the asking price, since we recognized that even above the list price it was still a fantastic deal. This one has been a waiting game – over two months and still no approval from the short sale lender. Luckily, my buyers are in a position that they can wait it out – especially for a deal like this.
Lesson learned: Be ready to wait. Everyone thinks they’re prepared to wait during the short sale process. Lenders tell us that 60-180 days is the “norm” for getting approval and closing on a short sale. Once you get past 60 days and still haven’t heard anything, believe me, you will start to get antsy. You will wonder if this purchase will ever happen. Be patient, be prepared to wait, and have faith. In my experience, I haven’t seen a ton of short sales that don’t get approved. Instead, it’s the buyer who changes their mind and causes the deal to fall apart.
Seems like I’ve been busy on the weekends a lot lately. The buzz around San Diego is that the market is definitely heating up, and my recent experience supports that idea. If you’ve been waiting for the right time to buy a home, this certainly may be it. Don’t let these interest rates and prices pass you by.