How to Avoid the Pitfalls of a Short Sale - Black Enterprise
Black Enterprise Magazine September/October 2018 Issue

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homeownership2As many distressed homeowners await relief from the White House’s loan modification and refinancing program, a growing number of distressed homeowners are considering a short sale — or a deal in which the homeowner sells a home for less than the value of the mortgage, with the blessing of his/her lender. Short sales can be good for both buyers and sellers, but there are a few things both parties should be aware of before taking the leap. 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.”

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.”

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.”

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Janell Hazelwood

Janell Hazelwood is associate managing editor at Black Enterprise, managing content across core areas of Money, Career, Small Business and Technology. She is also a featured blogger with My Two Cents, providing insights on branding, millennial career development, employment trends and leadership. She was previously a content producer and copy editor for Black Enterprise magazine, working across several editorial sections. The Hampton University graduate got her start in the newspaper industry, having worked for companies including The New York Times and Scripps Howard News Service. Her works and insights have appeared on The Huffington Post, MadameNoire, E!Online, Brazen Careerist, CBS News, and Arise TV.