I need short sale advice!

[Zappy]

So FI and I are looking for houses and we finally found one that we are crazy about. Well we just found out it is a short sale. Have you ever dealt with a short sale? Is it possible to get a great deal with them, or should I not even try to put in low offers? I'd love to hear some advice! Thanks in advance

 

[Hera]

I have and found the majority of them are a waste of time. They can take months just to get an answer from the bank if they have accepted your bid. The key is finding out if they have already been approved for a short sale and making sure they don't have a second on the home.
It's usually best just to wait for the house to become a foreclosure. Things have changed recently, though, as some banks have halted foreclosures.
Also, You will want to find a realtor experienced with short sales.

 

[Karl_K]

short sales are expensive you need an attorney to protect yourself from the start.
You can get some deals in some markets but in general if you have the money to buy you can get just as good of deals without the risk.
Do not sigh anything without an experienced real estate attorney working for you!!!!!
I know someone who the mortgage company tried to make the short sell buyer a party to the loan even if the sale fell thru!!!!!
Under the wording they could have forced the sale at market price and collected from the potential buyer who would then have to foreclose to get ownership!

 

[rhbgirl24]

The home DH and I recently bought was a short sale. Make sure you have a realtor that is extremely knowledgable in the process. I work for a foreclosure company and short sales can be a nightmare.

When you submit an offer it has to be accepted by the seller, which is the easy part, but it also has to be accepted by the bank that holds the loan. Normally for much less than the loan is for so the bank takes a cut, this approval is what takes the longest. Its possible that the price could already be approved by the bank for the short sale. If this is the case, then you are well on your way. If you really like the house and are patient, it is worth it - just be prepared for the process to take anywhere from 3 to 6 months.

 

[Miss Sparkly]

I am on the other end. Due to job cuts DH and I had to sell our house with a short sale. Ours was so smooth and fast. You can't lowball the lender too much. Ours had the house appraised and set the asking price as $5,000 less (our house value was cut in half by the economy) which still gave the buyers and amazing price. The whole process from the offer to closing took a month and a half and was very easy - though we only had a first mortgage. In the future, if we ever do buy again, we'll buy a short sale. I would find out who the mortgage lender is and do a bit of research on their reputation. For example, I would never buy a short sale held by B of A as thier notoriously difficult to work with. Good luck

 

[perry]

The key is to identify who the mortgage holder is - and find out their history on dealing with short sales.

If the mortgage holder is a local institution that you can deal with directly - you are much more likely to have a smooth process than some mortgage holding company you have never heard of before.

Perry

 

[Tacori E-ring]

The best advice I can give you is be patient! They take a loooong time. Sometimes up to 6 months. The logic is sometimes off. For example we placed a bid on a short sale and it ended up going to sale at the court house for LESS than we offered Find an agent who has experience. DH has successfully bought many but he calls/nags/pressures them daily in order to get results. Also the package has got to be amazing.

ETA: having a second is not really a big deal b/c if the home goes to the court house they get NOTHING. DH usually offers them $1,000 and they will usually take it. Just complicates the process.

 

[Zappy]

Thanks so much guys! I'm feeling kind of down about this...every other house FI and I look at comes in second to this short sale one. I guess the first thing we will ask about is where the loan is from. I was wondering though, what do you guys mean by a "second"?

 

[Miss Sparkly]

If they took out a second mortgage on the house. That can slow things down as the sellers and both lenders have to approve the sale.

 

[Zappy]

Oh, makes sense..thanks!

 

[Tacori E-ring]

zappy, I would be careful trying to handle a short sale yourself. There is an entire package the homeowners need to fill out as well as forms from you (ex proof of funds) and banks are not very patient. I would find an agent or investor who can assist you. Their fee will be worth the headaches.

 

[movie zombie]

zappy, I would be careful trying to handle a short sale yourself. There is an entire package the homeowners need to fill out as well as forms from you (ex proof of funds) and banks are not very patient. I would find an agent or investor who can assist you. Their fee will be worth the headaches.

agreed.

even very experienced seller/buyers make errors and end up losing said property in court. given the mess that foreclosures are in now, articles are being written that some buyers of foreclosed property may not legally own the home as the foreclosure may have been illegal as it was not performed according to law. in your case, a short sale has the bank involved; however, not all banks, their employees, or their contractors handling these things are trained and operate ethically. good luck.

MoZo

 

[Zappy]

Ok, so we decided we are going to get a lawyer involved to look things over. Now we are having trouble deciding how much to offer. For those of you who have experience with short sales: would you say that a large down payment carries more weight? Or does the bank care more about the total offer?

 

[Hera]

If the bank has approved the short sale, there is usually a certain amount of money that they have been approved for. I would not count on going much lower than that unless I had an all cash offer. Having a good amount of down payment is more desirable and banks will take the best looking (most likely to close escrow) package. However, there are a lot of all cash investors that like to bid on short sales and they can be your competition. In these cases, you may have to have a higher offer amount to get the house.

 

[Tacori E-ring]

Zappy, the bank could care less about your down payment. They get their money no matter what you put down from the bank you take out your mortgage. Again, I would highly suggest employing an Agent or investor that specializes in short sales. Paying them a small fee can save you tens of thousands of dollars. When my DH is working on a short sale he calls the bank EVERY SINGLE DAY. He knows what forms they need, what forms are helpful, how to put together the package so the bank is GRATEFUL for any offer. It is a complicated process and unfortunately banks make random decisions. Hopefully it will go in your favor. A professional can tell you what to offer based on the condition, comps of the neighborhood, and amount of the home owners loan.

ETA: things that can help is asking for a short closing (less than 30 days from the approval of the bank) and no inspection.

 

[violet3]

Zappy, the bank could care less about your down payment. They get their money no matter what you put down from the bank you take out your mortgage. Again, I would highly suggest employing an Agent or investor that specializes in short sales. Paying them a small fee can save you tens of thousands of dollars. When my DH is working on a short sale he calls the bank EVERY SINGLE DAY. He knows what forms they need, what forms are helpful, how to put together the package so the bank is GRATEFUL for any offer. It is a complicated process and unfortunately banks make random decisions. Hopefully it will go in your favor. A professional can tell you what to offer based on the condition, comps of the neighborhood, and amount of the home owners loan.

ETA: things that can help is asking for a short closing (less than 30 days from the approval of the bank) and no inspection.

for the most part, everything Tacori has said is correct. I sell real estate for a living and i have handled short sales -- all the above people have given some useful information to you. Short sales are typically a lengthy process -- the last one i handled took somewhere between 4-5 months and it was painful. I wouldn't let this turn you off, however. I do think good deals can be had in a short sale - not as much as in a foreclosure, but good deals still. You just have to be patient and willing to wait it out.

I disagree about the second leinholder however. It can make things tricky and they don't always take 1K for the loan. In the last short sale i did the first mortgage and the second mortgage were BOTH HELD BY THE SAME BANK. and still it was a nightmare. you'd think they could lump them together, or work on them together, but they couldn't. We waited and waited and waited for the approval from one of the leinholders and then were told "GO! you have to close in 30 days or we'll start this 4 month process all over again from the beginning." That's why I've highlighted tacori's statement above. With mortgage loans being the way they are today, getting a 30 day close can be tricky, unless you've got cash. Make sure your loan is all lined up from the get-go and stay on top of your bank.

There are people out there who specialize in short sales - the woman i used last time was a short sale negotiator. Her entire job (along with her husband) is to negotiate these sales between the buyer, seller, and the bank. I would NEVER EVER do another one without her or someone like her. If i had tried to do this myself for my seller, it would have taken twice the time. They are familiar with banks, with processors, and can get things done you will NEVER be able to get done yourself. What area are you in? I can find a referral for you.

Finally, in reference to your question: "how much do we offer?" It just doesn't matter, so offer low (the only reason not to is if you are afraid of competing offers). Here's how it will work: you make an offer, the seller either accepts or counters and you come to an agreement. Once the contract is ratified, it goes to the bank. The bank goes out and gets an appraisal - here's what matters. Baised on that appraisal, the bank will come back and counter you if your offer is too low -- they have essentially become the seller at this point. From the mouth of my short sale negotiator, they used to counter you back at a certain percentage below the appraisal - let's say 15%. But now, since short sales are so common, they will counter you back at the appraisal price - take it or leave it. (keep in mind, this is MY experience in MY area, but i am usually dealing with national banks).

I hope it all works out - feel free to message me if you have additional questions. GOOD LUCK!

 

[Zappy]

You are all so wonderful!! Thank you for your responses!

Violet, I would LOVE a referral but I'm kind of afraid to post my area and we don't have PMs

So...when we put in the offer...are other people still able to put in offers too? Even if the seller accepts the offer and it is being considered at the bank? This is a part I am not clear about.

 

[Tacori E-ring]

Zappy, different banks have different "rules." Some entertain offers as they come in. Some only deal with one offer at a time. If it is an amazing deal you will also be competing with professional investors, many who buy homes in cash. That is why you need to make your offer as attractive as possible (basically no stings attached). The last short sale my DH did the bank did not even counter b/c they felt it was so low. Because my DH is experienced though he basically found out what their bottom line was and worked from there. The deal wasn't dead b/c of the first offer and it closed. My best advice is not to get attached. Hopefully this WILL work out but short sales are never a sure thing.

 

[movie zombie]

Zappy, different banks have different "rules." Some entertain offers as they come in. Some only deal with one offer at a time. If it is an amazing deal you will also be competing with professional investors, many who buy homes in cash. That is why you need to make your offer as attractive as possible (basically no stings attached). The last short sale my DH did the bank did not even counter b/c they felt it was so low. Because my DH is experienced though he basically found out what their bottom line was and worked from there. The deal wasn't dead b/c of the first offer and it closed. My best advice is not to get attached. Hopefully this WILL work out but short sales are never a sure thing.

i have bolded and highlighted the best advise re buying any property: the mistake at any time when buying real estate is thinking i must have this house, no other house will do. that is absolutely not true and gets people to make mistakes re their finances and what they sign.

MoZo

ps glad you're getting a professional involved....just make sure said professional is very Very VERY experienced re short-sales.

 

[House Cat]

Zappy, the bank could care less about your down payment. They get their money no matter what you put down from the bank you take out your mortgage. Again, I would highly suggest employing an Agent or investor that specializes in short sales. Paying them a small fee can save you tens of thousands of dollars. When my DH is working on a short sale he calls the bank EVERY SINGLE DAY. He knows what forms they need, what forms are helpful, how to put together the package so the bank is GRATEFUL for any offer. It is a complicated process and unfortunately banks make random decisions. Hopefully it will go in your favor. A professional can tell you what to offer based on the condition, comps of the neighborhood, and amount of the home owners loan.

ETA: things that can help is asking for a short closing (less than 30 days from the approval of the bank) and no inspection.

for the most part, everything Tacori has said is correct. I sell real estate for a living and i have handled short sales -- all the above people have given some useful information to you. Short sales are typically a lengthy process -- the last one i handled took somewhere between 4-5 months and it was painful. I wouldn't let this turn you off, however. I do think good deals can be had in a short sale - not as much as in a foreclosure, but good deals still. You just have to be patient and willing to wait it out.

I disagree about the second leinholder however. It can make things tricky and they don't always take 1K for the loan. In the last short sale i did the first mortgage and the second mortgage were BOTH HELD BY THE SAME BANK. and still it was a nightmare. you'd think they could lump them together, or work on them together, but they couldn't. We waited and waited and waited for the approval from one of the leinholders and then were told "GO! you have to close in 30 days or we'll start this 4 month process all over again from the beginning." That's why I've highlighted tacori's statement above. With mortgage loans being the way they are today, getting a 30 day close can be tricky, unless you've got cash. Make sure your loan is all lined up from the get-go and stay on top of your bank.

There are people out there who specialize in short sales - the woman i used last time was a short sale negotiator. Her entire job (along with her husband) is to negotiate these sales between the buyer, seller, and the bank. I would NEVER EVER do another one without her or someone like her. If i had tried to do this myself for my seller, it would have taken twice the time. They are familiar with banks, with processors, and can get things done you will NEVER be able to get done yourself. What area are you in? I can find a referral for you.

Finally, in reference to your question: "how much do we offer?" It just doesn't matter, so offer low (the only reason not to is if you are afraid of competing offers). Here's how it will work: you make an offer, the seller either accepts or counters and you come to an agreement. Once the contract is ratified, it goes to the bank. The bank goes out and gets an appraisal - here's what matters. Baised on that appraisal, the bank will come back and counter you if your offer is too low -- they have essentially become the seller at this point. From the mouth of my short sale negotiator, they used to counter you back at a certain percentage below the appraisal - let's say 15%. But now, since short sales are so common, they will counter you back at the appraisal price - take it or leave it. (keep in mind, this is MY experience in MY area, but i am usually dealing with national banks).

I hope it all works out - feel free to message me if you have additional questions. GOOD LUCK!

Hi Violet,

Would you mind giving a round about of where you're located? I'm curious because no one has revealed to me yet that the bank would counter on a short sale if the appraisal came back at a higher price. So far, this hasn't been typical in my area with foreclosures, but I haven't heard a word about this when it comes to short sales.

I live in an area that has been hit hard by the housing crisis. Most foreclosures are going for quite a bit less than the appraised value. Do you think the banks would be gutsy enough to come back to short sale buyers and ask for full appraised value? I would see most sales falling through in my market.

All of this asked because I have an offer on a short sale.

My realtor will be getting a call in the morning!

 

[violet3]

Zappy, the bank could care less about your down payment. They get their money no matter what you put down from the bank you take out your mortgage. Again, I would highly suggest employing an Agent or investor that specializes in short sales. Paying them a small fee can save you tens of thousands of dollars. When my DH is working on a short sale he calls the bank EVERY SINGLE DAY. He knows what forms they need, what forms are helpful, how to put together the package so the bank is GRATEFUL for any offer. It is a complicated process and unfortunately banks make random decisions. Hopefully it will go in your favor. A professional can tell you what to offer based on the condition, comps of the neighborhood, and amount of the home owners loan.

ETA: things that can help is asking for a short closing (less than 30 days from the approval of the bank) and no inspection.

for the most part, everything Tacori has said is correct. I sell real estate for a living and i have handled short sales -- all the above people have given some useful information to you. Short sales are typically a lengthy process -- the last one i handled took somewhere between 4-5 months and it was painful. I wouldn't let this turn you off, however. I do think good deals can be had in a short sale - not as much as in a foreclosure, but good deals still. You just have to be patient and willing to wait it out.

I disagree about the second leinholder however. It can make things tricky and they don't always take 1K for the loan. In the last short sale i did the first mortgage and the second mortgage were BOTH HELD BY THE SAME BANK. and still it was a nightmare. you'd think they could lump them together, or work on them together, but they couldn't. We waited and waited and waited for the approval from one of the leinholders and then were told "GO! you have to close in 30 days or we'll start this 4 month process all over again from the beginning." That's why I've highlighted tacori's statement above. With mortgage loans being the way they are today, getting a 30 day close can be tricky, unless you've got cash. Make sure your loan is all lined up from the get-go and stay on top of your bank.

There are people out there who specialize in short sales - the woman i used last time was a short sale negotiator. Her entire job (along with her husband) is to negotiate these sales between the buyer, seller, and the bank. I would NEVER EVER do another one without her or someone like her. If i had tried to do this myself for my seller, it would have taken twice the time. They are familiar with banks, with processors, and can get things done you will NEVER be able to get done yourself. What area are you in? I can find a referral for you.

Finally, in reference to your question: "how much do we offer?" It just doesn't matter, so offer low (the only reason not to is if you are afraid of competing offers). Here's how it will work: you make an offer, the seller either accepts or counters and you come to an agreement. Once the contract is ratified, it goes to the bank. The bank goes out and gets an appraisal - here's what matters. Baised on that appraisal, the bank will come back and counter you if your offer is too low -- they have essentially become the seller at this point. From the mouth of my short sale negotiator, they used to counter you back at a certain percentage below the appraisal - let's say 15%. But now, since short sales are so common, they will counter you back at the appraisal price - take it or leave it. (keep in mind, this is MY experience in MY area, but i am usually dealing with national banks).

I hope it all works out - feel free to message me if you have additional questions. GOOD LUCK!

Hi Violet,

Would you mind giving a round about of where you're located? I'm curious because no one has revealed to me yet that the bank would counter on a short sale if the appraisal came back at a higher price. So far, this hasn't been typical in my area with foreclosures, but I haven't heard a word about this when it comes to short sales.

I live in an area that has been hit hard by the housing crisis. Most foreclosures are going for quite a bit less than the appraised value. Do you think the banks would be gutsy enough to come back to short sale buyers and ask for full appraised value? I would see most sales falling through in my market.

All of this asked because I have an offer on a short sale.

My realtor will be getting a call in the morning!

Hello Housecat! I am on the east coast - pa/md/de area. The last bank i dealt with was Wells Fargo, and like i said, I use a negotiator b/c it is really hard to get anywhere with the banks on your own.

Short sales and foreclosures are ENTIRELY different animals. You are right that foreclosures are going for much less than appraised value -- i just finished a foreclosure with a customer who got an incredible deal, but then the banks are already the owners at that time and have approved the listing price. In addition, many (but not all) foreclosures have special stipulations, such no financing contingencies, no home inspection contingencies, which is appealing to the bank.

In a short sale, however, the seller is still the owner (it's a grey area) of the house and they (and their agents) set the price. the parties are at the mercy of the bank after the contract is mutually agreed upon. Usually, you would hope that the listing price is pretty much in line with the value of the home in this market -- in the last one i did, the appraisal came back fine. That is, however, because i checked the comps in the recent 6 months and listed the home accordingly. Thankfully, the offer came in fairly close to the listing price (i was the listing agent, not the buyers agent), so we did not have a problem. However, if someone had come in and offered 50% of the asking price, you can be sure the bank would have countered back.

I think when people see "short sale," they think - i can get a steal! but the truth is that the listing price should reflect the recession and the price reductions already....it's already a deal. In line with that reasoning, if your area has been hit hard with the housing crisis, then the recent sales should reflect that and your appraisal should come in fine. Forclosures used to be exepmt from appraisals because they were considered to be outliers -- now that they are much more common, they are included in comps for appraisals. So, you asked would the bank actually counter back at full appraised value? yes, they might. But if you've been hit pretty hard in the recession, full appraised value shouldn't be much right now.

Hope that helps!