Need some advice on a buying a Short Sale.

[KCCutie]

We put in an offer on a home Sunday and last night we learned that it was going to be a short sale. It wasn''t listed that way but what we were told was that the seller had a 2nd mortgage or HELOC that she didn''t even tell the listing agent about

We''re a little peeved b/c we wanted to have 30 day closing and we''re hearing it could take 90 days! Which would be okay I guess, except my lease is up on my apartment in 60 days.

Our agent said the seller and listing agent were on the phone all day Monday and have talked to the lender and accepted our offer (complete with DPA and some closing costs) and the lender approved the short sale. So today we re-did our contracts for the short sale and I guess now we have to wait for the banks to accept this offer.

If the seller already talked to them and asked about the short sale and got approval to go ahead with the sale is that one step out of the way? Will that help speed this up?

I''m guessing this won''t be a huge loss for the bank b/c it''s not a high dollar property so where they might lose 10-15K on this one they could lose 50K+ on a larger property so doing the short sale on this one is much better than a foreclosure (oh and the 2nd Mortgage is with Countrywide so the last thing they need is another foreclosure).

Any one bought or sold a short sale recently who can tell me in general what to expect?

 

[Tacori E-ring]

*If* the house did foreclosed and went to your courthouse the second mortgage would be disappear. Meaning doing a short sale with you means they will get something (which is ALWAYS better than nothing

) (This is in NC by the way. Not sure if it differs per state). DH usually offers the second lien holder $1,000. They usually take it. Call them and ask if they have a short sale package (some have specific forms) or what they want from you. Get a fax number and contact name. Fax the offer (and forms) Good luck!

 

[KCCutie]

Wow! Really $1000 and they take that! I''m amazed!

I did find out that the seller owed just under 100K on the first mortgage and don''t know about the 2nd but the offer would cover about 10K of that one as well so if they sometimes take 1K, then 10K should be a no-brainer.

I think maybe this sale isn''t as short as some others are and that might make it look like a better deal for the lenders. I''m sure they''d rather do a short sale now and lose 10K then have to foreclose and risk losing up to four times as much.

Apparently the seller was on the phone with the lenders all day yesterday setting this up and we had to revise our contract to note the short sale and we''re sending that to the seller today so she can sign and then I guess it goes to the lenders......errr at least I think that''s how it goes.

Our agent also drew up an addendum that says if this closes after 8/29 we will incur extra costs and may walk away from the deal...She said this was to "put the fire under them" and hopefully speed things up.

 

[Tacori E-ring]

I don''t know how it works with an agent. Maybe Dee*Jay would know. He works directly with the distressed homeowners. Of course he pays *less* than what they owe. Usually the homeowner owes more than the home is worth anyways. 2nd mortgages are only a fraction of what the 1st is. Banks are so large that it does take time. I am not sure how many people they have to clear it with but at least a few. You need (or probably your agent) call on the homeowners behalf OFTEN until you get it in WRITING that they will release the loan for $x. You can have the homeowner sign a release form so your agent can discuss their loan (it will have to be faxed before they will say anything). Most people are very nice and helpful.

 

[KCCutie]

Tacori-

Thanks for your words of wisdom!

Update:
We found out that the seller owes about 96K on the first and 108K total (so about 12K on the second). Our offer including DPA and closing costs paid by seller and commissions for the agents would net around 103K. The second is with Countrywide and they are charging some crazy pre-payment fees and other ridiculous fees and charges just to get to that 12K so basically they will be losing out on mostly fees (which they shouldn''t have charged anyhow....talk about predatory lending geesh!)and my guess is they will try to lower the commissions but both agents seem to think the deal will go through and they both think that they can do it by Aug 29! YAY!

The HUD should be going to Countrywide for approval within 48 hours and we''re really hoping to set up a closing date in August sometime this week.

 

[Tacori E-ring]

Well good luck! Unfortunately buying a house is *usually* an emotional purchase. If you were willing to walk away you probably could get a better deal. Short sales are usually drastically discounted homes. Sounds like you are still paying retail. If you are pre-approved for a mortgage you have that on your side (scary things are happening right now and country wide KNOWS that). Either way I wish you the best. Owning a home is one of the best things!

 

[KCCutie]

Date: 7/14/2008 1:33:23 PM
Author: Tacori E-ring
Well good luck! Unfortunately buying a house is *usually* an emotional purchase. If you were willing to walk away you probably could get a better deal. Short sales are usually drastically discounted homes. Sounds like you are still paying retail. If you are pre-approved for a mortgage you have that on your side (scary things are happening right now and country wide KNOWS that). Either way I wish you the best. Owning a home is one of the best things!

Yeah we probably could get a better deal but this really is a great house for us. Even before we knew it would be a short sale we were happy with our offer so now we''re getting our original offer price it''s just taking a bit longer and for this house it''s worth the wait. If the wait gets to be too long we can always walk but houses like this in the area we like are rare so we''re gonna hang on for a while and see.

 

[Tacori E-ring]

Sounds like you are making the right decision then!

 

[Miranda]

Date: 7/14/2008 11:44:55 AM
Author: KCCutie
Tacori-

Thanks for your words of wisdom!

Update:
We found out that the seller owes about 96K on the first and 108K total (so about 12K on the second). Our offer including DPA and closing costs paid by seller and commissions for the agents would net around 103K. The second is with Countrywide and they are charging some crazy pre-payment fees and other ridiculous fees and charges just to get to that 12K so basically they will be losing out on mostly fees (which they shouldn''t have charged anyhow....talk about predatory lending geesh!)and my guess is they will try to lower the commissions but both agents seem to think the deal will go through and they both think that they can do it by Aug 29! YAY!

The HUD should be going to Countrywide for approval within 48 hours and we''re really hoping to set up a closing date in August sometime this week.

Congratulations on your soon to be new home. It sounds like you love it!

I am curious, though. Why do you believe a pre-pay penalty penalty would constitute predatory lending practices? Pre-pay fees are a way for lenders to guarantee their risk and make that loan more appealing on the secondary market-when there was one. They aren''t new fees the bank is cooking up now. The original owner agreed to these fees. Sorry, I just get a bit frustrated because I hear so much about predatory lending. Many banks are being hit so hard because people didn''t read their loan docs and now their screaming about predatory lending - in other words, playing dumb. I''m not arguing that it actually does exsist, but, it is usually because a crooked loan officer lied and the customer. The blame lies with the consumer though, IMO. Anyway, I could go on and on about loans, but, I won''t!

If I can give you a bit of advice, though, it is to read your loan docs carefully!!!!!!!!! In this environment the last thing anybody wants is a surprise. And post pics when you close! We love house pics as much and bling pics!

 

[KCCutie]

Miranda-

You''re right it''s not just pre-pay fees that make this predatory it''s a lot of things together. CW has been in the hot seat on this one for a while and it''s not just about his loan. I won''t go into specifics since it isn''t my loan but from what I have heard I don''t think they or at the very least the LO was not using solid loan practices when they did this loan.

Also it''s not so much that they charged those fees in this case but more that they are allowed to charge them at all that really gets to me. I used to work at a bank and I know they make most of their money off fees and I just think the whole thing is getting out of hand.

Thanks for setting me straight though and of course I will post pics when we close! I can''t wait!

 

[Miranda]

Ok, I see now. I hear so many people screaming about ''predatory lending'' when it really isn''t so I get a little defensive being that DH works in the mortgage/banking industry and My dad is part owner of a bank. I''ve never seen a lender rubbing their hands together and hoping to screw someone. I think the problem is with brokers more often. I know CWC is in the hot seat. I''m guessing what they''ll find is that Mozillo isn''t really as bad as he''s being made out to be. It''s a little known fact that the government put pressure on these lenders to offer these ''risky'' products. It''s all about deflecting and pointing fingers right now.

Anyway, as you know, it''s a great time to buy most anywhere! Good for you for taking advantage of this buyer''s market!

I''m looking forward to pics!!!!

 

[Beacon]

This is an interesting topic. Tacori, around here are are jillions of short sales listed. But I am reluctant to get involved with them for fear that the whole transaction might take forever or never close at all. With so many mortgages (many jumbo here) sliced and diced a million ways into complex products, I think it is hard to get a lender to actally make a short sale decision.

We have a lot of houses advertised at giveaway prices, but they are short sales, so I don''t know if those prices are acheiveable, once the lender gets involved.

 

[Tacori E-ring]

Beacon, DH has had success but this is his FULL time job. You do have to really stay on top of it. Lots of phone calls, paper work, and time. But they do close (if the offer is accepted) and there are great deals to be had. Banks rather unload the property than have it go into foreclosure or worse (for them) have the owners declare bankruptcy.