Nicole, Other/Just Looking in Rosemead, CA

Question on short sale and rates

Asked by Nicole, Rosemead, CA Sat Jan 17, 2009

What typically happens in a short sale? Is this a sellers or buyers advantage? Also, how do banks (lenders?) determine the rate or your loan- is it based on credit?

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Vicki Masell…, Agent, Duluth, GA
Sat Jan 17, 2009

A short sale typically occurs when the owner of a home owes more on the mortgage than today's fair market value of that home and the bank or lender approves the sale of the home for less than what is owed on the mortgage. Short sales can often be a better value and hold more benefits to a home buyer than a HUD or bank-owned property (the seller must sell or lose the home to foreclosure, the condition of the home is usually very good to excellent, and you have access to historical information about the home since the present homeowner is part of the transaction).

The seller's loan servicer (the company that owns the first, second, and/or home equity line of credit (HELOC) mortgages) must approve the price and terms of the sale. Timeline to complete a short sale transaction is usually 30-60 days and in some cases longer. If you are obtaining financing to purchase a short sale home, you are not under any obligation to use the existing loan servicer (although in some cases, you may get some preferrential treatment through a slightly lower rate, discounted closing costs, etc.).

I recommend that you ask your buyer's agent, family & friends for referrals to trusted loan officers in your area. Make application and get yourself pre-approved for financing. If you are going to be shopping for a short sale, I would speak to your loan officer and find out if they have any limitations or restrictions related to them funding such properties. Best wishes - Ted
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Jerri Furniss, , 43081
Sat Jan 17, 2009
As a buyer, I would prepare myself for a rather "drawn out" transaction cycle, It sometimes takes the bank who owns the property, weeks to respond to your offer. I'm not saying its good or bad; it's just important to have reasonable expectations so you don't get frustrated. As a buyer of a short sale property, you certainly have the opportunity to get a good price on a home.

The best answer to your second question is simply to contact a reputable lender and get pre-approved. It will cost you nothing.

Best of Luck!!
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Scott Godzyk, Agent, Manchester, NH
Sat Jan 17, 2009
Nicole as far as a mortge your best bet is going to be to meet with a local and trusted mortgage broker. They will be able to prequailfy you at no cost and let you know what programs you may quailify for. As far as the short sale you should get a buyer broker who is experienced in short sales so you can have someone who can guide you through a short sale. In most cases you can hire a buyer broker at no cost as they get paid a fee offered by the listing broker in mls and paid at closing. Short sales can be long and stressful.

Good luck with your search.
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Bob and Rich…, Agent, Newtown, CT
Sat Jan 17, 2009
Short sales can be quite tricky and if you need to purchase a home in the near future, don't get involved with a short sale, because it won't happen. Most short sales are priced aggressively to sell quickly. The offer is presented to the current owner and when they accept, the offer is then submitted to the bank who has the loan on the house. It can take months to get a response from the bank. This is due in part because the banks have sold off different parts of the loan to others and they must get approval from all who have ownership in the mortgage. We suggest putting your top number in for the property, as the bank will not necessarily negotiate with you.

As far as lending on a short sale, banks treat it like a regular loan. They will look at your credit scores (FICO), credit balances, outstanding credit, loans, etc to determine your credit worthiness.

Bob & Richelle Ward, Realtors, ABR
Prudential Connecticut Realty
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Dp2, , Virginia
Sat Jan 17, 2009
A short sale is a sale in which a property is sold for less than the balance of its mortgage.

Banks use several metrics (credit, work history, etc) to determine whether or not to underwrite a loan.
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