Before making an offer on a property that might be a short sale, find out if there is more than one lien holder. Additional lien holders might result from second mortgages, HELOCs, tax liens, or judgments.
A short sale is one where the contract sales amount falls short of the amount necessary to pay all liens against the property and deliver clear title. In order for clear title to pass, all lien holders must agree to accept an amount short of the full amount due. That can be a daunting task if there are several parties involved.
For the remainder of this post, I shall assume there is one bank.
As a buyer, find out if the seller, or their agent has approached the bank about a possible short sale. Most banks have a short sale package, or set of guidelines for the property owner. Has the property owner reviewed this? Started the process?
As a buyer, find out who will be presenting and negotiating the short sale. A seller may present the offer and short sale package to the bank, or may have his/her Realtor do the negotiating. In some cases, a sellers attorney may present the offer and short sale package. My recommendation is for an experienced Realtor to negotiate the short sale. In order for a Realtor to present the package and discuss the offer with the lender, the seller must provide permission to the bank for third party disclosure. Many Realtors are out there trying to present short sale packages without any understanding of what they are doing. As a buyer, you are entrusting your potential purchase to the person presenting your short sale offer. It might be worth it to know who that person is and what their qualifications are.
As a buyer, you will want to know what process will be utilized to present offers to the bank. In some instances, a seller will negotiate a contract and terms with a buyer, and that finalized deal will be delivered to the bank for approval. Another method of handling short sales is to simply forward offers to the bank for their review.
With short sales, it is a common strategy to set the offering price below market value to create an auction type response with multiple offers. If that is the marketing strategy employed, you will want to know how an offer will be chosen and in which order offers will be presented. You donâ€™t want to be the first offer, and have subsequent buyer offers have an advantage over yours.
All parties involved in a short sale are at the mercy of the bank. The bank may sit on offers for weeks with no response. There is nothing that even the savviest and sharpest agent or attorney can do at this stage. You simply waitâ€¦and wait some moreâ€¦until such time that the bank is ready. When you hear from the bank, be ready to respond quickly. It might seem unfair to be kept in the dark for lengthy periods of time, but thatâ€™s a reality of short sales.
Even when there are multiple offers, some buyers drop out of the picture when the unknown becomes too frustrating. Even if you are one of multiple offers, hanging in there has itâ€™s benefits.
Can you get a good deal? Maybe. There are good deals out there that are not short sales. Some short sales do go to contract at prices at a discount of up to 20% less than fair market value. It ultimately depends upon the buyers who step up to the plate, the motivation of the bank to settle, and the skill of the negotiator.
Bottom line - Possible good deal. Be patient and flexible. Those who do not have to plan or coordinate a moving date can usually weather the process easier.
Deborah Madey - Broker
Peninsula Realty Group - New Jersey
The sellers attorney on my deal submitted the paperwork to the sellers bank in July, we are still waiting for an approval. One of the biggest problems is the banks are overwhelmed with these and also getting a response can take a long time if you get one at all. It's best to have an agent with experience guide you.
The bank will do their own appraisal or a Brokers Price Opinion, where they hire a broker not affiliated with the property to give their value. Once they do that they assess everything and make a decision. If they decline it they may make a counter offer to you.
I hope this helped .
Legends Realty Group
The reason the banks take so long to make the decision is that once they accept an offer and agree to "forgive" the seller the mortgage money that is owing, the loss must go on the bank's books...that loss does not make the bank look healthy.
If you have the time to be flexible, you can get a great deal and the condition will most likely be much better than that of a foreclosure.
Isn't the Distressed Home Owner Law a Washington State Law? Since the inquiry is from NY, this law may not apply .
The posters who indicated that many Realtors shy away from short sales are accurate. We don't shy away from short sales, but we have a very candid discussion about the challenges and ambiquities before we embark on the journey with a client. We also will only work with short sale buyers with an exclusive buyer agency agreement. We do not have a consultant arrangement for a fee, nor is there a Distressed Homeonwer Law in NJ that is comparable to the WA state law.
Deborah Madey - Broker
Peninsula Realty Group - New Jersey
You should knoe that a very large percentage od real estate professionals are steering clear of "short sales" for a variety of reasons. First an foremost, these agents are looking to protect their customers from a very difficult, emotional, and often disappointing experience.
They know that approximately 10% of all short sale offers are successfully closed. They know the process could take months (2, 5, 6, or more). They know they will not be able to get the answers you need from the banki involved in a timely manner. They know you can't trust the information you have been given is accurate. They know most buyers regret getting involved is this process. They know there is a very high percentage chance that you will be frustrated with the process, disappointed with the bank, and mad at them.
There is more to be concerned with than "red tape." Definitely.........take a long look before you leap..........
Mitch Grooms Atlanta Realtor email@example.com
If the "complete" short sale package has not been submitted, or there is more than one lender on the property, or the family is still living there, or a notice of default has not been filed, I would find another house because you are likely to get your offer accepted at least anytime over the next few months. And, if the family is still living there they just might refuse to move or trash the place on their way out.
If you really want a short sale house then go ahead and make a fair market offer (one just slightly lower than the most recent sold comparable home). The listing price is a pretend price that the seller/bank is not likely to accept unless it is priced fairly. Then... forget that you ever made the offer and keep shopping. If you haven't found a home you would rather have over the next few months maybe you will hear back on this one and be able to get it.
Yes, be prepared to wait. Also, be prepared for a title report with some liens; so review it carefully and have your agent review it with the title company for red flags. If you think about the unfortunate position the sellers are in, think about what else is going on in their life -- this is where some of the red tape may come in. Behind on some bills -- many liens on the title are assumed by the new buyer, so you may be responsible for a handful of unpaid utility bills, etc. Also, the homeowners focus may be no longer on keeping the home in top condition. So, be prepared to have some deferred maintenance -- hopefully it is minimal -- but with situations like water leaks, that could cause wood rot, which is more costly.
Not all short sales will have liens for your assumption and deferred maintenance, but some things to consider when getting into that market segment.
Good luck! There are some great buys out there!
Short Sales can be awsome deals for buyers. The main issue when looking at buying a short sale is to be prepaired to wait. You have to get approval from the existing mortgage holder or holders that they are willing to accepts less than what is owed on the home. If you are in a position to wait, they can be great buys.
I hope this helps,
Prestige Real Estate Group, LLC
1745 Shea Center Drive #100
Highlands Ranch, Co 80127