(Short Sales and Early Possession – Part 1) One of the problems with a short sale is convincing the Buyer to be patient with the long period of time required for short sale lender approval. This is especially true if the Buyer needs a place to live prior to obtaining the approval. The average time for approval is usually 3 to 4 months, but unfortunately sometimes it’s extremely longer.
A new strategy to keep the Buyer on board is to allow the Buyer to “early occupy” the short sale house prior to lender approval. Depending on the specific facts regarding the short sale, this strategy may work extremely well in certain circumstances. The VAR “Possession by Purchaser Agreement” (Form 1000A), with necessary modifications, is suited for these situations.
The “early possession” by the Purchaser is not without risk in that the short sale may not be approved and the Purchaser may have to move out. However, many times the rewards of preventing the Buyer from walking due to the long delays with short sale approval will outweigh the risks of non-approval. In fact, once the Short Sale lender has accepted the contract price based on its own BPO, the success rate for a short sale is extremely high if the Buyer continues to be patient.
The next Tucker’s Tip will discuss some of the other benefits of early possession, and why the risks may not be as bad as they may first appear.