Profile picture for joseney21

inspection before or after bank accepts/rejects offer on short sale??

i made an offer on a short sale purchased in 2005 for 350K, i offered 230k (the home is for sale @ 247k and has had a few price drops to get there). The owners "agreed to accept" the offer according to my agent but it still has to get approved by the bank.

is it custom for the home buyer to perform a home inspection and draw out a contract (with an attorney of course) before learning wether or not a bank accepted or rejected an offer on a short sale?

I don't want to spend money before knowing that the bank actually accepted my offer. i understand this may be the case when buying under "normal" circumstances with the sellers being the only ones with a say when accepting an offer but i feel as if i may be blowing money away if the bank rejects the offer.



  • June 09 2010 - US
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Answers (12)

Profile picture for nwhome.us
The lender is going to assume that you have had an inspection because they don't care what you come up with, they aren't going to change their counter-offer for it.
You may be waiting for months to get the counter-offer, so it is better to know NOW whether you are wasting time or not. 
It is part of the cost of doing business.
  • June 09 2010
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Profile picture for joseney21
can i continue looking at other homes while waiting for the bank's answer or am i tied to this home, left to sit at home and wait??

could i do an inspection once i hear back from the bank? seems many things can change in so many months.
  • June 09 2010
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Profile picture for Ofe Polack
You need the signature of the bank before you have a purchase and sale agreement, so until then I would not do the Home Inspection.  In most of the cases the Home Inspection is done for your own knowledge of the condition of the property, very seldom will the bank either adjust the price or make repairs.  Remember I say very seldom, not never. In answer to your other question, indeed you can continue looking for other homes, until you get the bank's signature you do not have a purchase and sale agreement.  Hopefully you will find a straight sale and have the sellers sign the offer.  Before you decide to write another offer make sure you withdraw your offer on the short sale.  Good luck whichever way you go! 
  • June 09 2010
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There should be a short sale addendum, which after some period of time will allow you to back out simply because the bank hasn't responded yet. As for the inspections, we always suggest they are done after the bank accepts because who wants to waste their time and money having an inspector check a property the bank isn't going to accept your offer on.
  • June 09 2010
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never do the inspection, deposit the good faith, open escrow or anything before you hear from the bank and know that you are the winning bid.. then be ready to move quickly, because although they keep you waiting when they make their answer.. they want it right away...good luck
  • June 10 2010
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Remember this...a HOME INSPECTION is a report of the condition of the home on the day of the inspection only. Things can change in a fairly short time, especially depending on where you are located and the time of year. For example, winter weather and heavy rains can have drastic effects on a property. Buying a home is not a race. Take your time and do it right. That being said, I would advise you against having an inspection early.
  • June 10 2010
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If you are ok with burning the cash for the home inspection then go ahead and do it now. Otherwise I would wait until the 3rd party (the sellers leinholder) approves the transaction. If you get the home inspection now and the leinholder wants $25k more what will you do? And no you should not keep looking at other homes, you've got a contract on one already, if waiting is an issue then withdraw your contract on this one and go find one that is not a short sale. Best of luck.

  • June 10 2010
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Profile picture for Ofe Polack
Hi Phillip, I do not think there is a P&S agreement until all signatures are in.  If three signatures are required for this particular P&S and only two are in, there is only an offer but not a contract yet.
  • June 10 2010
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Profile picture for nwhome.us
In our neighborhood, one in four offers on short sale properties make it to the finish line.  The buyer or the lender can both walk at almost any time.
If you have found a home that you want it is just like any other offer, put your best foot forward and demonstrate that you are committed to the purchase process.  Base your offer price on a CMA on REO properties that have sold and get your inspection done.  The probability of success rises considerably.
If you don't really care if you get the home or not and are just throwing a number at a lender and hoping that they will bite, don't do anything but go to the auction.  But be aware that most lenders aren't stupid and will have an appraisal done on REO properties that have sold and when they do counter they may predicate the counter on closing in 10 days.  So if you have time to get your inspection and financing done in 10 days, go for it then.
The only time that you will NOT be able to terminate the short sale offer to purchase is when the lender comes back to you with a complete acceptance of your offer. How likely is that?  How much of a low ball is your offer?  With the results of your inspection in hand what requests for repairs did you make?  If you structure the short sale addendum to expire every 4-6 weeks (again not much of a display of commitment to the lender) you can continue shopping.  If you find something else that really catches your soul, terminate the short sale at the next cycle or when they counter your offer.  Or if you waited on your inspection, terminate the short sale based on your inspection. Can you see why lenders might prefer to have the inspection complete?
Which side of one-in-four do you want to be?  What is that ratio in your neighborhood?
  • June 10 2010
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Profile picture for joseney21
well, i'm glad we didn't do the inspection before finding out if the bank approved our offer (because of this the deal fell through, the sellers wouldn't present the offer to the bank).

i'm glad because home prices have continued to drop and regular sales are now down to what my offer was on the short sale in that area. I'm really thinking about renting for another year and putting buying off until next fall.

BTW I just found out NY is one of the states with the longest default to foreclosure period (or foreclosure to REO). this is probably why NY hasn't had the price drop it needs but it's coming!!
  • July 06 2010
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Profile picture for Ofe Polack
I am sorry about the outcome, but take it as an experience.  Now you know the advice we gave you was correct and it saved you the cost of the Home Inspection.  Better luck next time!!!
  • July 06 2010
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Inspection when the seller accepts but before lender approves so as not to waste valuable time.   Good short sale certified agents know what the approved price is.  If the offer isn't where it has to be the seller will be advised not to accept it.
  • July 07 2010
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