1) you will want to do the inspection since the house will usually be "as is", with NO repairs done at all, including the buyer's (yours) responsibility to obtain a township city fire compliance certificate and a Certificate of Continuation of Occupancy (CCO) if it is needed by that town. (I say usually because I had a seller who volunteered to do the minor repairs needed for the certificate of occupancy)
2) you will want to get your mortgage application in because as Walter pointed out, the short sale approval usually comes with a 30-45 day closing date contingency from date of approval.
But please, please DO get an attorney if you do not have one already. It is a necessity to help guide you through the process and advise you of your rights, obligations and keep up with the paperwork involved.
Again sorry, I will try not to answer a question again witl litle or no sleep under my belt.
There are going to be expenses on the part of the buyer regardless if the purchase goes through or not. In a short-sale, the seller still owns the property. It is not a bank owned property therefore the seller has to sign a contract and proceed with an attorney review period. The buyer will have to hire an attorney to represent them. There will he a lawyer fee.
Also, you are going to want to do your home inspections upfront, perhaps even before you make an offer. In a short-sale, the property is sold "as-is, where is" therefore it is worth knowing before you get deep into a transaction what issues, if any there may be with the property. The banks are not offering home inspection credits or repairs.
Finally, the buyer is going to want to start the mortgage process and apply for a loan. When the bank approves the short-sale, they usually order the closing to take place in under 30 days from the date of approval which is not enough time to apply for a loan and receive a loan commitment. By applying upfront, you may have to pay for a longer rate lock, since a traditional 60 day rate lock will mostly likely expire during the short-sale process. I recommend a 6 month rate lock with your lender.
So yes, there are expenses which you may not recoup if this short-sale does not go through. This is the risk of buying a short-sale property.
I have several attorneys in the area who specialize in short-sales, Feel free to reach out to me and I'll be happy to email you their information if you are interested in speaking with them.
Please let me know if you have any additional questions. I'll be happy to assist.
All the best in your home search.
Walter J. Burns
201-653-8488 Ext: 230
As to any loses on the part of the buyer the Home Inspection and a updated BPO should be done to determine the value of the offering property. If you have a good Buyers Agent they should in my opinion do more they draft and offer. A sharpe agent should be able to walk through a property especially a condo and determine at least some of the known repairs. Then the agent should do for the client a current BPO and attached it to the offer making notations as to why, what and how much it plays on the offering price.
The cost of a attorney out ways the few hundred dollars of the inspection and has a larger impact on the deal then the attorney fees. Also if it is done correctly all attorney fees should be paid out of the proceeds of the Short Sale. By completing a Short Sale Package correctly and completely with all exhibits attached in the package this can ficilitate the process quicker. The problem is that when the package is submitted to the lender they are missing pieces of the puzzle and then this is where the delays take place
The other part is that the listing agents do not work for the same objective with the buyers agent which should be in all cases is to get the home sold where the Seller has total relief from all deficiencies moving forward. But in most cases that I have seen over the 2 years is everyone is on their own side. This is not what is should be and most deffinently the agents on both side should have the same goal NO MATTER what to get the tranaction done.
If all would act in a professional then transaction would go a lot smoother and a lot less stress also remember there is no such thing as short sale approved until the offers are submitted and accepted because even if the seller signs the offer as exceptable the seller can not pass clear title unitl the bank approves the final amount being delivered to the bank after closing. So Make sure your Agent does their job completely
In this case it seems the SELLERS (owner not the bank) has already accepted the offer, but it now needs to be approved by the bank for the short sale.
Many banks will NOT do a BPO on a house before there is a written contract so even if you know what the seller owes, it sometimes hard to figure out what sales price the bank will accept.
I have one listing like that now, despite my please to the contrary. It seems counterintuitive...do the BPO, let the "investors" determine what they will accept as an final payoff, and list the house as a pre-approved sale of "X " dollars, but that's typically not what happens.
I have had 4 short sales listings this year this year so far (not that you'd know it by my sleep deprived first post and I am still embarassed by that mis-information) and three have sold...
The owner of record (the seller) signed the contract, then it was presented to the bank for the short sale approval. Each time while waiting for the approval, the buyers did their home inspections and got their mortgage application going while waiting to hear from the bank.
The third one is scheduled to close on Monday. The buyers did their home inspection on May 18 and the bank only issued the short sale approval on June 2, giving us till July 2 to close the transaction.
Your statement that "Really, a home inspection BEFORE you make an offer? Is that how they're doing it in NJ? In Ohio, even in short sales, we'd never let our clients pay for a home inspection before an (sic) excepted offer. " is not totally wrong, but in some of these cases, it pays to do the inspection even before the approva. I have seen them done even before an offer is made. If the house is really, really bad, the buyer can walk away, and is only out a few hundred dollars for an inspection, rather than a few thousand for the mortgage application plus potential repair costs too.
With a condo, it may be less important to do the inspection right away since some of the repairs will most likely be covered by the HOA
You have a variety of answers and advice here. Short Sales can become frustrating and drag on. First off, as previously mentioned, DEFINITELY get an attorney. Your Real Estate Agent & Attorney can work together and assist you through this process. As far as an inspection, I would have my client wait until they get some kind of an approval from the bank, however if you want to risk a few hundred dollars and have it done prior then that is up to you. But also remember, the bank can take quite a while to make a decision and who knows, you may find another home during that time frame that you are interested in. Unfortunately that is what happens sometimes with Short Sales.
Much Luck to you!!
Why in the world would you do an inspection if your offer hasn't been accepted? You have enough time to do your inspection after you get out of attorney review. You cannot get out of attorney review until you get an seller's bank's approval. You pay the attorney at closing, not approval, no closing, no payment. The bank usually gives you 30 days to close, but that doesn't mean you have to close in 30 days. I have good number of short sales and they never closed on time because of the loan, but I got extension as many time as I needed. The loan is never done 30 days, but everything else can be done in a week such as inspection, appraisal, Certificate of Occupancy, title, deed, etc. From experience, loan officers/banks promise you they will be able to close in 30 days and it never happens. They always blame the buyer saying... "they didn't bring the documents on time, they didn't respond, waiting time and so on". My recommendation would be to start working on your loan. Get a Underwriter Approval (DU) at least . It might cost you the application fee (this is something you might lose if the S/S is not approved) I think there is no reason to lose anything else. Your deposit is returned to you if the sale is not final. Short sale is very hectic so you will lose your sanity!
In NJ, especially with a short sale, you absolutely should have an real estate attorney who is familiar with all the paperwork involved in a short sale representing you throughout the transaction.
You have probably already given a good faith deposit (usually $1000) and perhaps your second deposit (if there was one) which should be either in your Realtors agency trust (escrow) account, if you are using a Realtor, or in the attorney trust (escrow) account.
If you are out of attorney review, you should not pay for an inspection until you know the bank has approved your offer. If the bank does not approve your offer, (usually because the "investors" want more money) and you are not willing to increase your offer, you can have your attorney cancel the contract. You will get your deposit money back, and perhaps your attorney will not charge you for his/her time, IF he/she feels you will eventually purchase another home.
If your offer IS accepted, then go ahead with the inspections. However, it really is important to have an attorney (and a Realtor) in your corner since they can both help make the process move along more smoothly and sometimes more quickly as well.