William, Home Buyer in Riverside, CA

The house next door is a 'short sale'. How would I go about buying this house?

Asked by William, Riverside, CA Sun Aug 3, 2008

The house is listed at $249,900. The house is worth $300,000. My house is worth $300,000-$317,000 and I owe $95,000 and my mortgage is $779 per month. I have little or no money to put down, only equity in my house. What would be the steps to go about purchasing this property. It has been on the market for 5 days. Is it possible to obtain a no-down payment loan. I have excellent credit and my income is $85,000 a year without working overtime.

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4
Beth’s answer
I was just wondering what your goal. are you going to live in the house? or just an investment. i have been attending seminars on real estate investing and let me tell you this. you are in a good position to be investing
right now. how about getting a little money from your house equity enough for down payment and a little extra,
then buying that property lower than they want, then rent your house that might be enough to pay the mortgage and possibly more for a little monthly extra cash flow for you.ask for longest time of mortgage so the monthly is lower. if you have extra money, you can always pay extra but your monthly obligation is lower just in case there is no renter. also make sure to hire property manager to manage the property.
Good luck.
0 votes Thank Flag Link Thu Sep 11, 2008
William,

I would suggest you first speak with a lender. No money down payments are not really available these days unless you use a hard money lender. I would ask what your options are with a lender in terms of tapping into the equity in your home to help purchase the second. When making an offer on a home you will need a pre-approval letter as well.

Next I would make sure to have someone to represent you the buyer in the purchase of the second home. Short sales can be a long and frustrating process so you will want to work with someone who is familiar with short sales. After submiting and offer it can take a few months for the bank to respond to your offer. And until the bank approves an offer, others can submitt offers on the property.

I would suggest you talk to a realtor in the area who can help ask questions to find out where in the process the short sale is (have they even contacted the bank yet? will the bank only negotiate a short sale after offers come in?). Is the list price of the home close to the values in the area, or is the list price close to what the current owners owe on the property? You will want to compare the value of the home with others in the area to determine the value of the property.

Good Luck!

Lisa Cartolano
Alain Pinel Realtors
0 votes Thank Flag Link Mon Aug 4, 2008
Decide whether you wish to work with the llsting agent or another Realtor and ask for his/her assistance for a good current CMA. Be sure to look at the home carefully because the home will be sold "as is" and you want to make an offer based on having to complete any repairs at your own expense.

Successful short sales are often near or even a little above the asking price in our area, but that may differ in your area. Typically if there are no offers on the home for 30 to 45 days, the asking price will be lowered. Make your own offer based on what you are willing to pay and the loan amount you qualify for.

Talk to your mortgage lender to be pre-qualified before you make an offer. Most mortgage holders require a pre-qualification letter to accompany an offer. Once the home next to you sells for below the "value" your own home value will be devalued also, so you may or may not be able to get a home equity loan. You might try to get a home equity line of credit before you ask for a pre-qualification letter just to be sure that money will be available. However, that equity credit amount make fluctuate if the market continues downward. Also talk to your Realtor and mortgage lender about what other loans are available with little or no money down. Ask about an FHA loan. Are you planning to move to the other house or keep both? I hate to rain on your parade, but it is risky to have all of your money tied up in 2 houses side by side with a volatile market especially. We recommend that you have readily available emergency savings money also. How secure is your employment situation? What if your hours were reduced or you lose your job and have to look for another, you really should have savings before you buy another home.

If you do decide to move forward, you should know that after the first offer, there is usually a 60 to 90 day time lapse before the mortgage lender will respond to offers. If you are the successful bidder, closing is usually expected in 30 days, so move quickly to apply for your mortgage and order professional inspections, etc. You will then know what repairs are needed and can decide within the contractual time frame whether you wish to proceed to closing or back out if repairs are too expensive. Order a survey and be sure that the closing agent has a copy of the contract to begin working on the title. We strongly suggest that even if the seller does not provide and the mortgage lender does not require title insurance that you buy it anyway.

Be cautious. Good luck.
0 votes Thank Flag Link Sun Aug 3, 2008
Hello William,
When that short sale closes it might not help the equity in your house. Good think is you might be able to purchase that house by using the equity in your own house. I'm not too familiar with what income you need to purchase the house but and if you can qualify for a loan. In today's market you will need at least 3% down. Speak to a lender about your options. If you need someone let me know.

Best,

Monique Carrabba
The Reavis Group
0 votes Thank Flag Link Sun Aug 3, 2008
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