There are probably additional costs involved, besides paying off the mortgage (s) though. There will usually be legal fees associated with the filing of foreclosure, not to mention, attorney fees the seller incurs (which are normally paid by the bank) and now the government is even giving allowance to the sellers for moving costs.
So, you need to be represented by an attorney who is familiar with short sales and can get you an accurate pay-off amount. Of course, you might not want to pay all of those fees and that might be negotiable. Usually,though, sellers do not have any money to put on the table.
Not all short sales take a lot of time, but according to information I learned while taking my short sale and foreclosure specialist certification, the average time in NJ is 1.5 yrs!
ERA Advantage Realty
The real problem is you are likely to pay MUCH MORE than the property is really worth.
If you only overpay by like $5,000 it would hurt, but not to much. You may find the house owes $50,000 or more than its present value. That makes it a real money sucking machine working on emptying your pockets for no real gain.
There's another way, too, so long as you're willing to pay whatever is owed on the property . . . which is what your basic strategy is.
You could buy it "subject to"--that is, subject to the existing loans. It's safe for you, but risky for the seller. Basically, the seller deeds his property to you. You, in turn, agree to pay his mortgage (and, as necessary, any penalties, interest, and arrearages that have occured in order to bring the mortgage current). It'd be like assuming the loan, except the loan is not assumable.
In buying it that way, the seller would be violating the lender's due on sale clause. And the lender's recourse? Foreclosure, if it chooses to pursue that option. Except that's what the seller and the lender are facing anyway if a sale doesn't occur. In today's market, very few lenders want to foreclose on a performing loan. And once you'd started paying on it, it'd be performing.
The advantage to you is that you avoid "all the short sale waiting games" and the uncertainty over whether the lender will even approve the short sale. The advantage to the seller is that someone else is relieving him of the burden of the mortgage. And he doesn't end up with a short sale or foreclosure on his credit--just (perhaps) some late payments. The risk to the seller is that you now own the property, but his name is still on the mortgage. If you default, the bank comes after him. (But they were coming after him anyway, so he wouldn't be in a worse situation than he already is.) The advantage to the lender is that you've converted its nonperforming loan into a performing one.
At some point in the future, you'd refinance the property, removing the seller's name from the mortgage.
You could, if you wished, pay the seller some money in the transaction. And the seller should make sure his agent is properly compensated. As noted above, you'd have to be willing to pay whatever the seller owes. And you'd also have to be comfortable with whatever loan is currently on the property, since you'd be responsible for paying it.
Hope that helps.
You can certainly offer more than the house is listed for but there are several factors to consider. Is the house listed at today's market value or below? If you offer more, what happens if the house doesn't appraise for what the seller currently owes (most likely its not worth what the seller owes because that's the reason its a short sale). Why would you want to more than what the house is worth today? You would be starting out with a negative equity even if you were able to get a mortgage or make up the difference in your own cash funds at closing.
Has your agent spoken to the listing agent? Is the short sale in progress with the bank (have they submitted the homeowner's package for the short sale)? Sometimes the bank will tell an agent when they list the property that they will consider offers between this range and that range. Did the bank tell the listing agent a range or did she go with market value or below market value in an attempt for a bidding war?
Gina Chirico, Sales Associate
Prudential New Jersey Properties
973-992-6363 ext 116 office
In short yes. If you as a buyer was willing to payoff the existing lien or liens in theory this could be done. The issue you will run into is if you are getting financing from a bank the house will have to appraise for the sales price. The current owners may owe more than what the house is currently worth. So the real question is whether the homeowner is just in default or are they upside down? Just how short are they? If you have an agent you can have them posed these questions to the listing agent.
Jeremy S. Hill, Realtor Associate,
Keller Williams Realty
Licensed PA, NJ
"Your Interest 1st Always"
It depends on property owner current lender, if home is short sale most likely would still need lender approval, there could be undetermined amount of expenses, taxes, insurance and etc, PLUS mortgage due and past debt