Are You a Buyer Looking to Purchase a Short Sale?

The Good Hoods Group – 619.928.9006 – http://short-salesandiegohome.yourkwagent.com/ 
Are You a Buyer Looking to Purchase a Short Sale?

by Brandon Brittingham

It seems that there is a significant amount of confusion when it comes to purchasing a short sale. There are many misconceptions when it comes to this type of transaction, so below I have provided some information to potential buyers of short sales. If you are looking to purchase a short sale, understand that it is not the same as a normal sale and the approach is very different. There could be several parties involved and issues that are unknown to the buyer and buyer’s agent that can affect the transaction. If you are looking to purchase a short sale here is some helpful information.

1. On average, to get a short sale approval, it can take 60-90 days.

There could be mortgage insurance and an end investor on the loan as well as the servicer, which means it has to go through three different processes. Bank of America could be the servicer on the loan but they do not actually own the loan, so, the short sale has to pass their guidelines, then go to the mortgage insurer if there is one, then to the end investor like Fannie Mae and Freddie Mac. If you are a buyer and can’t wait at least 60-90 days for an approval and then another 30 days to go to closing, then you need to look at other houses. The worst thing you can do is tie up a house that is in a short sale with no intention of being patient while waiting for a short sale approval. Approvals can come sooner than 60 days, but industry standard is at least 60 days to get an approval or denial.

2. There is a general assumption that you can purchase a short sale for 40-50% under its listed price. In a short sale the bank comes out and does a valuation of the property and will expect a slight discount, but will not accept a huge amount under the market value.

Hopefully, if the agent who is handling the sale is experienced, they will have already gotten an approved list price from the bank by the time you are interested in making an offer. The bank will usually be willing to negotiate on that price, but will not, in almost every case, take 40-50% off of that price. To that point, you may be able to get a reasonable deal on a short sale, though it will not be, in most cases, as much of a deal as you may be able to get on an REO (foreclosed property). Also to that point, most short sales will be in better condition than an REO. When you look at the potential repairs a comparable REO needs and the time and expense it can take to do those improvements vs. a short sale being sold at a slight market discount with improvements already made, the investment could even out. There are REO properties that can be picked up for a huge discount, but require massive repairs that a comparable short sale may not require.

3. Short sales are a very difficult process and it takes a qualified person to handle this type of transaction.

With this type of transaction it takes a very experienced agent on the listing side as well as the buying side. Make sure before you move forward on the transaction that the listing agent has ample experience dealing with these types of transactions, or you could be tied up in a contract for months that never goes to settlement. There are several different types of short sale processes and each bank’s process is somewhat different; it takes a professional who has had experience with all of these different types of short sales to help facilitate a successful transaction.

4. In most short sale transactions the properties are sold “as-is” and no repairs will be made.

Although there are some exceptions to this rule, speaking in general, short sales are sold “as-is” and no repairs will be made even if they are found during a home inspection. In most short sale transactions the bank will require both the buyer and the seller to sign an addendum that states the property is being sold “As-is” and no repairs will be made.

These are just a few short pointers for buyers who are looking to purchase a short sale as they are a reality in every market, and if you have the patience you may be able to get the home you are looking for at a discount!

What is a Short Sale? San Diego Short Sale Specialist Answers The Question…

James Renfro|The Good Hoods Group|http://shortorstay.com/thegoodhoodsgroup/| (619)928-9006

WHAT IS A SHORT SALE?

San Diego Short Sale Specialist Answers The Question…….

WHAT IS A SHORT SALE?

A “Short Sale” (Also referred to as: “Negotiated Settlement”, “Short Pay”, or “Pre-Foreclosure”) occurs when a Lender agrees to accept less than the amount owed on the original note or total payoff, as an alternative to foreclosure. If the property is worth less than the amount owed on the loan, even a foreclosure would result in a loss for the Lender. Often a Lender’s bottom line will dictate the benefits of accepting less money in a sale now versus the cost of the foreclosure process and selling the home as its new owner.

HOW LONG WILL IT TAKE?

The Short Sale negotiation process can be rather lengthy. It may take several weeks to several months for an approval. Many Lenders will have several layers of bureaucracy, insurers, and investors to maneuver through in order to get a Short Sale approved. It is important to be patient during this long process.

BUT MY HOUSE IS GOING TO FORECLOSURE, WILL I HAVE ENOUGH TIME?

Maybe – Maybe Not. Accepting a buyer’s offer WILL NOT automatically stop the foreclosure process. However, many times a Lender can be persuaded to delay the foreclosure to allow an attempt to negotiate the Short Sale. There are no guarantees, but many sellers have been successful.

HOW DO I KNOW THIS WILL WORK?

There are no guarantees. No promises will be made. A missed payment means the Lender has the option to foreclosure. Presenting alternatives to the Lender that highlight the benefits of the Short Sale as opposed to moving forward with a foreclosure is part of the negotiating process. We are skilled at what we do, but NO GUARANTEES will be made concerning the Lender’s acceptance of the Short Sale.

WILL I GET ANY MONEY FROM THE SALE?

Not unless you are apart of a Government Short Sale Incentive Program. A universal requirement of Lenders when approving a Short Sale is that the owner/borrower will not get any proceeds from the sale of the property. The Lender will be accepting a loss on your loan; they will most certainly allow you to profit from the situation.

WHAT HAPPENS IF THIS DOESN’T WORK?

Your house will likely go to foreclosure. A Short Sale is something tried after you have exhausted your other options.

WHAT IS A “RELEASE”?

A Lender may offer a release” which is a security instrument against the property in exchange for a repayment of less than the total amount of the loan. A release will allow the property to be sold without paying off the obligations of the loan. A release will allow the property to be sold without paying off the obligations of the loan. However, the loan is not satisfied. Advantages: A successful Short Sale will allow the property to be sold thus avoiding foreclosure . Disadvantages: The remaining debt on the property (sometimes called a “deficiency”) still exists.

You are still liable for the loan and still owe the money to the Lender. Reality: The California Revised Statutes allow certain time periods for first and subordinate lien holders to pursue a deficiency judgment. Keller Williams and its associates recommend sellers seek the advice of a qualified expert on deficiency judgments.

WHAT IS A SATISFACTION?

A Lender may agree to accept less than owed as complete and total satisfaction of the loan and release its lien against the property. Advantages: Your note and obligation to the Lender are satisfied for less than you owed. When the property is sold, the debt is paid off completely. Disadvantages: You may have some tax consequences as a result of the debt relief. Keller Williams and its associates recommend you discuss potential consequences with a qualified tax adviser.

HOW CAN I HELP?

The Lender will require a review of financial package that usually includes: two (2) months of bank statements, two (2) months of paycheck stubs, two (2) years of tax returns, a Financial Worksheet and possibly other information. The leading reason for delay and eventual denial of a short sale approval by the Lender is due to the Seller’s failure to cooperate and/or deliver the necessary documents in a timely manner.

To help your success in this Short Sale, please immediately collect as much of this information as possible, complete the attached “Financial Worksheet”, and return it to this office. These things will help increase your likelihood of a successful Short Sale.

There are times when tough questions deserve an honest answer. A question homeowners like yourself are asking every day is, “Do I short sale my home or stay and tough it out?” Either way, to make the best decision, you should have all of the information in front of you.

Please take a moment out of your day to try out the Short or Stay Calculator.

Being able to see the current market value of your home and projecting when your investment will break-even and become an asset again is invaluable to your decision making process. With the Short or Stay Calculator you’ll be able to do so in a matter of minutes.