Short Sale Myths- Top 3 Short Sale Buying Myths- Earnest Money Deposits
If you are in the market to buy a Florida short sale especially in the South Florida market it is a sellers’ market right now.
Earnest money deposits are one of the reasons you may not be the winning bid on a short sale.
Buyers who listen to well-meaning family and friends may lose out on the home they have their heart set on by not offering an earnest money deposit up front. Most of the time their real estate agent is not experienced in negotiating short sales. The inexperience leads to a misconception about earnest money deposits. Buyers agents tend to think that not putting their buyers’ money at risk is working in their buyer’s best interest. Usually that sounds like common best practices. But short sales are different than traditional real estate transactions. Buyers in this market also make the common error of thinking that they should make an offer without an earnest money deposit until the short sale lender approves the sellers’ request to do a short sale.
In the current market the short sale seller will often receive multiple offers to consider. When we list short sales we require all offers to have an earnest money deposit upon ratifying the contract between the buyer and the seller. We would not encourage a seller to accept an offer that does not have earnest money up front. The earnest money shows the seller that you are likely to stay in the deal until the short sale lender approves the short sale or the contract expires.
The strongest offers are those with a healthy earnest deposit that are effective on the day that the contract is signed by both The buyer and the seller.
The strongest offer is in the best interest of both the buyer and the seller. The seller is taking a chance with the buyer that he chooses. The seller is up against a foreclosure most of the time if the house is listed as a short sale. Most brokers are required by their MLS ( the Multiple Listing Service) to change the status of the listing from “active” to “contingent” as soon as the seller accepts an offer. Not many agents want to show properties that have an offer on them (CTG status) so the seller is trusting that the buyer will stay in the deal for the long haul. Having your property listed in the MLS as CTG is almost like it being listed as a pending sale. Sometimes short sales take a long time to close and the seller runs the risk (if he or she is not making his or her mortgage payments) of losing their home to foreclosure. If this happens, neither the buyer nor the seller gain anything.
The buyer who wants the property for an investment or for a principle residence is in a much better position to have their offer accepted if it accompanies a good and fair earnest money deposit.
Remember that short sales can take a long time to close. The seller will want to know that you, the buyer are in this for as long as it takes to get approved. If you are not able to wait, you should not make offers on Florida short sales.
authored by Katerina Gasset