Home Buying in Herndon>Question Details

MamaBlaze, Home Buyer in 20170

How to buy a short sale contigent on sale of previous property?

Asked by MamaBlaze, 20170 Fri Aug 10, 2012

We are looking at a short sale property we would live to buy. We are in no hurry as we own our home now. But we need to sell our current home to get a new mortgage. Will banks accept a short sale offer contingent on a buyers sale of previous property?

Help the community by answering this question:

Answers

14
BOB GORDON’s answer
Mama - Can you purchase the new property without selling? Since you are "in no hurry & own your home," don't make the offer contingent. Too many variables. Apply for a new mortgage and make an offer on the short sale to secure the First position. Meanwhile, we can list your house and if the buyer you know really wants to pay your price, can qualify for financing and his/her house is truly saleable, you can have a contingent transaction. To reduce your need to move twice, having an agreement in place to rent-back after you close on the sale of your existing residence is a good idea. This way, you can close as quickly as possible with the buyer motivated to buy your house and be in a first position for the shortsale you want. If you manage to close on your house before the short sale completes, you can always elect to finance your new home in cash with the proceeds of the sale.
0 votes Thank Flag Link Mon Aug 13, 2012
you have a potential buyer who will need to have a home sale contingency, too???

You will get an agent "when it's time"??

IT'S TIME NOW!

Look - you really need to sit down with an agent - there are way too many loose ends that need to be dealt with now before you can even think of moving forward............getting advice from strangers (even though we are all well intentioned) here really will serve no useful purpose........call in an agent and speak with a loan officer if you want all of this to move forward....
0 votes Thank Flag Link Mon Aug 13, 2012
sounds like you are putting the pieces together.

Not sure who your husbands company is..but if you contact me I can explain the pros and cons of getting a Realtor through his company.

Just a suggestion. I have seen many Relo's get poor representation because they were unaware of the options.

Kind Regards,

Erik J. Weisskopf,ABR,CDPE,CRS,GRI
Re/Max Distinctive Real Estate
Erik@AskMeAboutHomes.com
703.216.1222
0 votes Thank Flag Link Mon Aug 13, 2012
We don't have a realtor currently. When it's time, we can get one thru my huabands company. I just have a lot of questions as we've only owned one house and it was a foreclosure not a short sale when we bought.
A house in the neighborhood we want buy just popped up. We have a potential buyer for our house but they need to sell theirs so a lot of items are in the air.
0 votes Thank Flag Link Mon Aug 13, 2012
Your 2nd question is a good one.

Are you using a well qualified Realtor? Sounds like maybe either you do not have an agent or you have little confidence in your agent.

The 2nd question you ask..is best answered in conjunction with the first question as these two things go hand in hand. One would need to review your actual contract (if you have one) and or craft a contract to protect you. There are a host of different ways.

Ex/ Just because you have to sell your home to buy...doesn't mean you have to have a home sale contingency is some cases. What you need to have is a contingency that can work as a home sale contingency. It's all is the verbiage and intent..and is very difficult to explain in this forum.

Please tell us..Are you working with a Realtor? if so, what does your Realtor suggest?

Best of luck!
0 votes Thank Flag Link Mon Aug 13, 2012
All short sales sell for their fair market value - the sellers' lenders make sure of that. Many short sale homes are as well maintenaned as standard traditional sales, and sometimes better.

However, occasionally short sale sellers become depressed about their situation and tend to neglect their property, which may require some maintenance and TLC - I think this is where the perceived value is as some of the maintenance items are Do-It-Yourself items that can be done by the new homeowner creating a sweat equity.

Unfortunately, most/all short sale lenders (sellers' lenders) do not accept home sale contingency. Your best option - if you insist on finding a short sale bargain - is to sell your current home, rent for a few months and use this time to find a short sale bargain.

However, be prepared to be disappointed as short sales are hard and there is nothing easy or short about them. I represent home buyers and sellers in Northern Virginia. Feel free to contact me directly.
0 votes Thank Flag Link Sun Aug 12, 2012
No matter what - whether you do or don't have a buyer in your pocket - you will clearly need to make the sale contingent on the sale/closing of your current home.

So - thats your "out".
You should also have a time frame written into the contract giving you an out after a set period of time if the transaction drags on...(but I don't think you will be getting that far as yet).....

By the way.......are you using an agent????

Just so you know -
Having an interested buyer dosn't assure you that it will close - there are challenges along the way to a closing...........for example.....does that buyer have home inspection contingencies??? well, there may be items you will need to address or negotiate, or the buyer might walk away.............does your buyer have a mortgage contingency?...if so..........that will take several weeks to be approved.....
So........
It will be weeks until you know for sure that buyer is armed and ready to go.......and still......until it closes, nothing is certain.
I had a sale that fell apart 2 weeks before the closing because the buyer lost his job (yes, they do check).

Glad you find this advice useful.....but.....based on your comments.....it seems to me that you are navigating in uncharted waters........ and do need proper advice and guidance.........I really hope you have an agent for that purpose.

Best wishes.........
0 votes Thank Flag Link Sat Aug 11, 2012
Thank you for all the advice. This is a wonderful site! Any advice on how to protect ourselves in case we need to back out of purchasing a short sale? We have a potential buyer for our current home, but would like protection in case that doesn't go thru.
0 votes Thank Flag Link Sat Aug 11, 2012
First of all......the asnwer to your question is simple. I started off this thread by giving it, and it has been repeated several times - No, you cannot buy a short sale subject to the sale of another home.

Now.......You can "think" all you want about a bridge loan, which has been suggested below, but don't get your hopes up - they are very hard, if not impossible, to come by these days, and usually they require that the first home already be under contract..........yours is not.
Your income would have to be high enough to qualify for both the current and new loan.....most people don't qualify. If you are fortunate enough to have a very small remaining mortgage on your current home, and your equity, along with cash you have is enough to complete the sale, then a home equity loan could be used, but I highly doubt that will work for you...and the bottom line is - you still can't make the short sale "contingent" on another sale.

On the practical side.....and cutting to the chase once again....if you need the money from your current house in order to purchase the short sale (which clearly you do, as you said you "need" to sell), you cannot even attempt to buy until your first home is sold.

Forget a short sale - even a "regular" seller will hesitate to take their home off the market for you while you try to sell. Maybe they will give you a fixed period of time and negotiate a price, but.........unless it's a house that no one else wants to buy, and has been sitting on the market for a long time, you will most likely be told to come back when your home is sold.

Finally, someone touched on this below.......I think one of the biggest misconceptions many consumers have is that a short sale is the deal of the century.........it can be, but most of the short sales I have seen (that actually closed) haved pretty much sold at fair market value.

I can understand a buyer saying at closing - as was shared below - "I no longer even want the house".

I can understand that.

In the meantime- educate yoursef in regard to the market - speak to an agent to get a realistic idea of what your home is worth, and make a plan, moving forward, so you can choreograph putting this all together.


Best wishes...........
0 votes Thank Flag Link Sat Aug 11, 2012
My colleagues below provide some keen insight however there are a few points to consider...

Ever think about a bridge loan? this can perhaps make things work depending on your credit and income.

As for short sales and closing times...each one is unique. I have had one take six months while another was less than 45 days. Experience matters! Both from the listing side AND the selling side. Look for a CDPE or someone with TRUE experience in short sales. There is plenty to know and the rules are constantly changing. An experienced agent will have a better idea of what you are dealing with by asking the listing agent a few key questions.

As for contingencies other than appraisal...there are certainly ways around that as well. Creativity here is essential.

As for being "tied up" in a contract for months...Never had that happen. It all depends on how you craft the contract. I call it "craft" because there are many ways to do the contract other than simply filling in the blanks. My clients almost always have an out...plain and simple.

Also, as for it being a "buyers market" I will tell you under no uncertain terms...this is not the case in all markets and submarkets. There is a definite lack of quality inventory in the Northern Va. area.

If you would like to discuss further..feel free to contact me and I would be happy to put my 25 years of experience to work for you.

Kind regards,

Erik J. Weisskopf, ABR,CDPE,CRS,GRI
Re/Max Distinctive Real Estate
Erik@AskMeAboutHomes.com
703.216.1222
0 votes Thank Flag Link Sat Aug 11, 2012
Good morning MamaBlaze,

In general a Seller will not accept a purchase agreement contingent on the sale of your current residence. I sincerely doubt a Lender in a Short Sale situation would, either.

I've been helping First Time Buyers for 22 years as a mortgage professional and I will tell you what I have always told my clients here in New York: If you are a First Time Buyer, steer clear of foreclosures and short sales.

For Short Sales, my attitude of late is that First Time Buyers should steer clear. Short Sales tend to be a better deal for the homeowner than for the Buyer. You'll wait MONTHS for the homeowner's Lender to approve the short sale; maybe as long as Six or Seven Months. Meanwhile, you're stuck in a contract to buy that home. I closed a short sale recently with a Buyer who, after seven months said this at the closing table, "I don't even want this house anymore."

And he didn't even get the "deal" on price he thought he was getting! The house appraised for only slightly more than he paid for it at the short sale price. He walked into this deal thinking he was buying a home for $100,000 less than it's value. In the end that wasn't the case.

There are plenty of motivated Sellers with their homes listed on your local MLS. Go find a good Local Mortgage Banker, get prequalified, then find a great, experienced Realtor, and buy the home you want at the price you're willing to pay. It's a Buyer's Market, after all!

Trevor Curran
NMLS #40140
0 votes Thank Flag Link Sat Aug 11, 2012
No they won't. Banks are eager to dispose of the short sale as quickly and don't accept contingent contracts. Also, short sales can take up to 90 days to close depending on the circumstances of the original mortgage.
0 votes Thank Flag Link Sat Aug 11, 2012
No. Lenders will not accept a short sale contract with any contingencies except appraisal.
0 votes Thank Flag Link Sat Aug 11, 2012
No, they won't..............
0 votes Thank Flag Link Fri Aug 10, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer