Don't be scared by all of the horror stories... I am a buyer's agent and work with a team here in Corona. We've successfully had many buyrs close with short sales. You just have to have agents that can pick out the real deals from the ones that will never close. Sometimes, it can be a nightmare... but if the agent looks for the right type of property and asks the listing agent the right questions, you'll know which ones to avoid and which ones are viable options.
as well as other agents and buyers,
Sadly, I am having to advise my buyers as well as other agents to AVOID SHORT SALE HOMES WITH WaMu loans. (see link for other comments),
The process Diana describes is the latest at WaMu, now part of JP Morgan Chase. WaMu has been radically changing their process at least every 6 weeks. A short sale with WaMu can easily take 10-12 weeks to get a negotiator who will provide an email, take your call or call you back. During that time WaMu will have changed their process at least twice, and perhaps four times. Due to the changes, your negotiator may quit in frustration and you will literally start over from the beginning.
WaMu is the ignored step-child of JP Morgan Chase. JPM/C does not want to provide management oversight, system resources, staffing, digital workflow process software, or infrastructure necessary to run the loss mitigation department to minimize loss by clearing inventory to motivated buyers. Per WaMu staff, people from Chase do not want to come to WaMu because it's a career-ending move. Competent people at WaMu are desperate to leave or finagle transfers to Chase. Morale is terrible.
I have a short sale listing on day 311. We began in August of 2008 by submitting our complete package. I was acknowledged complete about 3 weeks later. Since then we have had 6 or 7 negotiators; 4 disappeared, I think one had a nervous breakdown over Christmas holiday. We have had 5 buyers, 4 of whom walked and the current buyer may do the same when their patience eventually runs out.
I have made nearly a year of almost daily phone calls to WaMu loss mitigation to track our (lack of) progress. The phone people are polite and we have professional discussions. But eventually they confide that the internal operations are a mess. The ex-military guys call it rude names.
There is no rational business or financial reason why the property on which I'm representing the seller should not have been sold 7 months ago. It is a non-performing asset. WaMu and JPM/C are losing money every day, and the market value is also diminishing, currently about 66% of the balance owing.
Perhaps JPM/C doesn't want to sell so as to not book the loss? Perhaps there are management bonuses involved? I would sincerely welcome your insight.
To summarize, i highly recommend that you AVOID WAMU SHORT SALE properties.
I currently have two buyers awaiting news on accepted short sale offers. One was accepted at the very end of January; the other the third week in March. Unfortunately, in both deals, second mortgages were involved--a situation that makes completing a short sale much more difficult.
To illustrate, in the first instance, the holder of the first mortgage was being bought out by another bank just about the time our offer was made. This accounts, in part, for the extraordinarily lengthy amount of time this "deal" has taken. The bank buying bank transaction has been finalized, and things seem to be moving, though with my buyers very interested in taking advantage of the federal tax credit that expires 1 December, they're getting more than a little antsy. Entirely understandable. We've even gone looking specifically for foreclosure/REO properties because we know those deals typically take less time. But, with the number of homes on the market having dropped by about 80% in the last year, and with the vast majority of those being short sales, there really aren't that many foreclosures on the market. When the moratorium on foreclosures expired a few weeks back, everyone thought there was about to be a glut of new properties on the market. But after only four days, the banking community instituted a new moratorium! Why not?! They're getting multiple offers on every new foreclosure listing.
Since you are in Corona, and to illustrate my point about inventories, I will add here that there were 315 active listings in Corona at the end of June. That compares with 1,418 in June 2008. There were 1,635 in April 2008 and, if memory serves, a little over 2,000 in October 2007. The decline has been steady, every single month since then. But even these numbers are not telling the whole story. That is because, the typical (but mistaken, IMHO) practice by too many listing agents is to continue to show a short sale property as "Active" even when the sellers have accepted an offer that has been sent to the bank. The agents believe they need to continue to accumulate offers in case the accepted offer is rejected., But as has been pointed out elsewhere on this board, the fact that the bank comes back with a "number" doesn't mean that the original buyers can't counter it. Therefore, it seems to me that the most equitable thing to do is put a property in "Back-up Offer" status. That way, the number of actual "Active" listings would drop even more precipitously and the banks would, perhaps, be encouraged to throw a few more of their REO properties onto the market.
The second potential deal is still alive, though it's on life support. The 2nd mortgage holder refused to take what the first was willing to give, and the deal seemed absolutely dead--but, it may have been just "mostly dead" (Billy Crystal, The Princess Bride!!). A couple of things happened. In this case, the holder of the 2nd mortgage was bought out. The new owners made it known that they would be wiling to take only five percent of the proceeds whereas their predecessor had insisted on ten percent. The sellers' agent, realizing that values had continued to decline a little, proposed an overall drop in price (~7%) but calling for my buyers to put in some extra money specifically designated for the 2nd mortgage holder. She and I will also throw in a piece of our commissions to bring the 2nd mortgage holder up to its requisite five percent of proceeds. Now, the 2nd mortgage holder is on board, but we're still awaiting word from the 1st. But, meanwhile, even though my buyer is putting in some extra money, he's still paying less for the house than originally.
Meanwhile, as to your last point regarding price, the two "deals" described above have taken so long that the first one has already had to have a second Broker's Price Opinion (BPO) done. It came in nearly $13,000 below the original/accepted offer. As to the second one, if the bank is even semi-interested in the revised offer, it will almost certainly order a new BPO to verify value. So, since a short sale is hardly ever (I hesitate to say never, though it may in fact be the case.) an expeditiously done process, you could easily be looking at a situation where, given that you "offered well over the asking price", it may be that if the bank drags its feet, a second BPO (or, if it gets that far, your lenders' appraisal) will not come up to your offer price and you'll have to either come in with more cash or risk the deal by insisting the bank take the BPO price. Those wouldn't be the only possible outcomes, but I think you get the idea.
To substantiate the above paragraph, Trendgraphix info shows that the average sales price of Corona properties in June was $306K, down from $311. But the average list prices were nearly $100K higher than sales prices. The listing price on your deal could have been intentionally set low so as to attract multiple offers.
Make sure your "acceptance" is real. That means that the contract is fully executed between buyer and seller and that written acceptance has been communicated back to you. Not simply told by the listing agent that they forwarded your offer to the bank and is awaiting approval. If that is the case you really have nothing but a possible stake in the game when they come back with highest and best. Remember, the bank is not the seller in a short sale situation. The bank's approval is simply another contingency to the contract, so at least make sure there is a contract.
Also, ensure that your offer is not way below recent comparable sales, or at least you have the ability and are willing to go up to market value. Many listing agents will list the short sale property far below reasonable market value to generate offers and send one or all offers to the bank to get the ball rolling. Don't think the bank will not do a BPO or Appraisal to determine value before approving a short sale. Don't expect a screaming deal with a short sale. In my experience, REOs typically represent better deals as the price listed is the price approved and they are able to close quickly.
By the way, if you used the Short Sale Addendum with your offer, and you should have, paragraph E permits the seller to continue to market the property while waiting for the written approval from all lien holders. If you have a truly accpeted affer, without the multiple offers box checked, then your offer has first right of refusal if the bank's approval comes back with any modifications and conditions. And do examine carefully the approval letter before sending your deposit to escrow. Make sure the conditions are acceptable to all parties. I've seen too many times in which buyers and their agents were so excited after waiting so many months for that approval to jump into escrow without fully understanding the conditions of the approval.
Lastly, I haven't heard of the bank rejecting the offer unless they were not going to approve a short sale at all. Usually, they come back with written approval with the price they will accept and other conditions to be met. This is essentially a counter and believe it or not, is negotiable.
With that said, short sales can be risky because they are not guaranteed. You could get an approval with the short sale department that didn't communicate with their foreclosure department that went ahead and foreclosed. Also, just because a property is listed as short sale, does not mean the bank has indicated they would consider a short sale or that the sellers even qualify. Make sure your agent is asking the right questions to verify that it is indeed a valid short sale offering so that you don't waste a lot of time.
I concur with all the previous comments on timing as well. That is in line with what I've experienced.
Hope that helps.
If the seller has a loan modification still open it has to be closed first or they close out both requests.
The major problem is partly because they are changing and developing new systems as we write and with banks changing ownerships their policy changes.
The short sales are worth it, it just takes time and believe your agent if she/he tells you they havenâ€™t heard anythingâ€¦.but make sure she/he keeps in contact with the listing agent at least weekly. Have your agent ask how far along are they in the process, do they have a negotiator assigned, do they have a complete and updated package into the negotiator and how long did the bank say the turn around process is.
Also find out how many loans there are on the property. Many times the buyers are having to bring in 10% of the value of the second to pay the second loan off. I hope this gives you more insight.
Diana Margala 909-945-5763
I recieved acceptance on a short sale last week. Then the bank said they did not like the way something was worded and now has to reapprove. We are hoping it does not take more than this week. It took nearly five months to get the approval. It is a long process. It makes no sense to most people. One would think the bank would be happy not to have to go through forclosure but that is not the case. Don't think your realtor is not doing everything he or she can to speed it up. In most cases it cannot go any faster. There are services out there that are, for a fee, working with the banks and I believe they are making progress in speeding things a little. Be prepared. There is no reason why you cannot continue to look for homes while the short sale is in process. Maybe you will find something you like just as much that is readily available. The last I heard on a percentage basis is that about 15% of shortsales are actually closing. There is no garrentee that after you wait it out you will get the property! I wish you the best with your endevor.
Depending on the lien holder, depends on the processing time for short sale approval. In the recent months Short Sales are taking on an average of 3 weeks to receive a response and from that point once all the details are smoothed out it will probably take an additional 45 days to close escrow.
Banks sometimes decline the offer if it's too low compared to their Broker Price Opinion they receive.
I hope this helps a little.
Ken is accurate in his account of time and process. The only thing that I would add is if the offer is near the market price and all of the information from the seller, their hard ship, their financials, bank receipts, pay stubs, and tax returns and their aren't any unusual leans on the property then there will be less problems. The bank that has the loan is also the key many of them work fast than others, so hopefully you will be working with a bank that moves quickly and an agent representing the seller that is experienced in short sales.
Congratulation and Good Luck
Diana Margala 909-945-5763
Depending on the total amount owed versus the sales price, the number of loans on the home, the lenders involved and their willingness to negotiate, and the skill of the listing agent in presenting a suitable package to the lender, the process of getting the offer approved by the bank may take from one week to over two months.
I've found that short sales on homes with just one (1) lender tend to be approved faster than those in which multiple lenders must agree on the price. If there is a second or third lender, the situation gets far more difficult to negotiate and often the buyer must step in to offer some "funds" to the lenders to ensure their approval of the sale.
If the amount of money that is owed on the home is significantly higher than the amount that is being offered, it may be better for the bank to foreclose on the property. The reason, of course, is that the lender has mortgage insurance on every loan, and--in some cases--that insurance only kicks in when the home is foreclosed. So long as the "loss" is an acceptable business loss from the standpoint of the bank, the offer is likely to be approved. To determine how much is actually owed on the property, ask your Realtor to obtain this information.
Finally, never underestimate the skill of the listing agent. I've worked now with two Realtors who have the CDPE (Certified Distressed Property Expert) designation and they have been really excellent in moving the sale forward with the bank. Although I've heard other Realtors minimize the designation, I can only say, from personal experience, that my transactions with CDPEs tend to move more smoothly than those without a CDPE at the helm.
Good luck and I have my fingers crossed for you!
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA