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Scott Godzyk's Blog

By Scott Godzyk | Agent in 03109

SO YOU WANT TO BUY A SHORTSALE? ADVICE AND TIPS YOU NEED TO BE SUCCESSFUL


One of the most asked questions is HOW DO I MAKE AN OFFER ON A SHORT SALE AND HOW CAN I HAVE A CHANCE IN GETTING IT ACCEPTED? Buyers and their agents often ask why wasn't this offer accepted and why did it take so long. First there is no law that states the bank has to complete a short sale, they only lose money and make it as hard as possible. While that is the thought of most, if submitted correctly, you have a very good chance of making it work and if submitted incorrectly or missing anything, you may be doomed from the start. 

Buyers before entering into a short sale sceanario, you need to ask:
 
Is this house in foreclosure? if so chances are there isnt enough time for a short sale

How many loans or liens are on this property? Hopfully you have a buyers agent who can pull a copy of the title report becuase if there are liens or additional mortgages it is less likely this will be approved. in order to get it approved they need to negotiate all teh leins and 2nd mortages as well.

Is the listing agent experienced in short sales and who is negotiating for the seller? If they are not experienced, the short sale process will be much more difficult.

THE BASIC PROCESS OF THE SHORT SALE

1. The listing agent or negotiator completes a title search to see how many liens and if home is in foreclosure.
2. Listing agent or negotiator makes preliminary contact with sellers bank to obtain any specific forms or instructions they want or need to complete the short sale
3. The listing agent completes a broker price opinion, home should be priced at or just below market value. pricing a home too low, will result in the short sale being counter offered or refused.
4. Listing agent markets property, obtains an offer, submits short sale package to the bank.
5. The bank will assign a negiotiator for themselves, they will review the package, if complete will order an appraisal or bpo, once it comes back will review what the home is worth versus what they will receive from the short sale against what they would receive if they foreclosed.
6. This process when at it's best is 6-8 weeks, the bank will then accept the offer as is or may counter the offer trying to reduce costs of the short sale or get more money from the seller or even the buyer.

THEY WANT ME TO PAY MORE UPON GETTING APPROVAL

One of the largest problems is when the bank does give an answer, there is not enough money to pay the mortgage off, taxes and fees associated with teh short sale. The bank is asking the seller to pay, or the buyer to pay or the agents to pay this difference. 

To avoid this problem, When the listing agent or negotiator is preparing the net sheet, they need to factor in future costs of taxes, water, sewer charges or hoa fees up to 6 months out. You can always lower the costs but can never raise teh costs on your net sheet or you need to start over.

WHY DO THEY NEED MORE THAN 1 BPO?

It is very common for a bank to use at least 2 bpos and sometimes a 3rd or 4th being a full appraisal from a licensed appraiser. BPOS's are subjective and unless you have an agent very expereinced and neutral,. they are not getting a true price but a price near what it was listed for. Some agents are using various personal reasons to price it real high or real low messing up ones short sale so they use 3 of them, have them checked through a desktop bpo check and average them.

THE ASKING PRICE..

Pricing a short sale can mean the difference between bank approval or 6 months wasted. Banks hate short sales, in most cases they only lose money money on them and look for any excuse to deny them. The most common problem with pricing is they are priced too low. Most buyers think the bank sets the price on the short sale. Well they do not, it is listing agents who set the price and more often that price is set too low. How can they price it too low? Well two things factor into whether that bank will be accepting that short sale.

1. The sales price has to be at or near market value
2. the bank will only discount that mortgage so much under what the current owner owes no matter if it is at  market value or still too high after the calculations.

Most banks will only discount the mortgage up to 20% of what they owed. Now some banks and in some area's this will change, it can increase and has, so the only way to know is to ask the contact for the sellers bank, what is the maximum amount of discount they will accept. Most banks will outline their policies and requirements. This is important because you need to know that the seller is even quailified to complete a short sale.

Most agents will set the price as low as possible and the short sale is doomed before it starts. The key in short sale is setting the price at market value and giving it time, if no offers to reduce it and keeop a log of how and why it was reduced. You should be able to submit honest and realistic comps that  you used to base your price on.

PUTTING A DEADLINE ON YOUR OFFER

Alot of people are trying to beat the system by placing a deadline on their offer such as this offer expires in 30 days. By doing this you have actualy ended your chances of approval before they began. The banks just can not work that fast. The system in place has to run its course. if a bank sees a date, they will ignore it and may not even begin work on it becuase they know they cant work that fast. they will ignore your offer all together instead of wasting time, money and resources on offer that will be pulled half way through the process.

IN CONCLUSION

If you want to enter the world of short sales, make sure you have the time, energy and are not stressed easily. The number one tip is check for yourself what that house is worth in todays market and use that to base your offer on, do not use the asking price as you do not know if it is the value, too low or too high.

Updated October 24, 2011

PLEASE FEEL FREE TO ADD YOUR TIPS OR EXPERIENCES WHETHER GOOD OR BAD...



Blog written by;

Scott Godzyk
Godzyk Realty Group

Manchester NH
www.ScottSellsNH.com

Comments

By DONALD KEYS,  Sat Oct 9 2010, 08:05
Thank you for the information Scott.
By Scott Godzyk,  Sat Oct 9 2010, 08:13
You are welcome Donald. I am hoping it helps and clears up alot of questions people have on short sales. They can be great deals if done correctly.
By brentspencer4,  Fri Nov 2 2012, 07:49
Scott, I just made an off on a short sale and I offered about 20K less than the asking price and the house has been on the market for over a year. The home owners are 3 months behind on there payments, but it hasn't gone into foreclosure. This property is in the country and has 5 acres and a large shop. I am afraid that getting the BPO's are going to be just someone guessing for the most part. We are in the stage now that they offer has been signed by the sellers and is now in the banks hands. How long is it before you know if they are moving forward with the BPO's? Does the agent get notification of this movement? I hope you get this.. Thanks in Advance. B

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