The Sacramento Short Sale “Mirage”
Buyers pursue short sales to get a good deal. So when you see a price listed for a home that you think is too low for the neighborhood, before you jump , ask your agent to call the listing agent to find out if the home has already got offers and may be going Contingent. Also find out about how many banks, which banks, if the loans were purchase money also, if there is a second, is it an original loan or was it added later or refinanced. These questions and whether the home is owner occupied, if it is a second home, the owners financial situation… these all have an impact on whether or not the deal has a chance to be approved.
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If the listing agent doesnt have quick answers and a logical plan when aske “what is your plan for gettting this short sale approved?”- This Short Sale may be a “mirage”- some are uncloseable… you might just walk away.
Find a better situation.
Because you might want to think twice about making an offer on a pre-foreclosure, short sale home. It’s not as simple as you may believe, some will never close and very few can close in 60 days or less.
Many of my Sacramento short sale home buyers have waited 4 to 6 months to close on a short sale, sometimes longer.
What is a Short Sale?
A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it.Be aware that the seller need not be in default — to have stopped making mortgage payments — before a lender will consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. The seller may have over-encumbered, owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.
Check the Public Records
Do your research before making an offer to purchase. Your agent can find out who is in title, whether a foreclosure notice has been filed and how much is owed to the lender(s). This is important because it will help you to determine how much to offer.If there are two loans, you could have a problem. The first mortgage lender’s position is protected by the second lender, unless the second lender does not want to foreclose. If a seller owes $160,000 on the first and $40,000 on the second, offering $160,000 leaves nothing for the second. The first will need to give something to the second to gain its cooperation. Determine Your Type of Marketplace
Hire an Agent with Short Sale Experience
It’s one HUGE strike against you if the listing agent has never handled a short sale, but it’s even worse if your own agent has no experience in that arena. Most Sacramento Real Estate Agents have handled at least on or two shortsales by this time, but you may need an experienced short sale agent. An agent with experience in short sales will help to expedite your transaction and protect your interests. You don’t want to miss any important detail due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner. Sacramento Short Sale Buyers Agents need to know about:
–Recourse Debt and how that may impact your chances of a successfull short sale. Will your sellers hang with you?
–Short Sale Tax Implications how will this impact your sellers? Will they just bail?
Qualifying the Property and Seller for a Short Sale
A lender is unlikely to agree to a short sale unless the seller has no equity and is unable (THe Hardship) to repay the difference between your sales price and the existing loan or loans. Sellers need to provide a hardship letter to the lender along with a financial statement backed up with their past two years tax returs, two month’s bank statements and two months paystubs.
Some sellers may also owe taxes on the amount of debt that is forgiven- Soes the listing agent know that? what if there is recourse debt on the second mortgage? these are all issues tht have plagued any Sacramento Short Sale buyers in the past… Also: if ther are too many repairs or if the home may actually “comp” for more than what you think it is worth, you might be in for a long negotiation, but if it’s the house of your dreams, go for it, if it’s not, you might just move on.
Submit Documentation and Purchase Offer to Lender
Once the seller has accepted your offer, the listing agent will send it along with the complete seller package (see above) to the lender for approval. The offer is contingent uppon third party approval so you do not have a deal until the lender accepts. Also, send the lender a copy of your earnest money deposit. Do not be surprised if the lender asks you to increase it. In addition, the lender will need to see that you have your own loan available and you are preapproved. Send a preapproval letter to the lender. It will help if your agent sends a list of comparable sales that support the price you are offering to pay for the home. Sacramento short sales have been around for over three years and now “the package” is a big part of our business-
Give the Short Sale Lender Time to Respond
The Shortsale addendum will make your offer contingent upon the lender’s acceptance. Most of the time documents are scanned in to a system by one person, an electronic account is or file is started and then, several days later, a shortsale negotiator is assigned to the file. Sometimes ther are different levels of negotiators, one will order the appraisals and BPO’s (Broker Price Opinions) nto assess the market value of the home, and the next level negotiator will have the entire file to work with in order to make the final decision. Some lenders submit short sales to committee, but either way, most can make a decision within two to three weeks after all reports and documents have been received and reviewed, a good listing agent will keep your buyer’s agent appraised to the process. It can take from as little to a few weeks to as long as several months, depending on the number of banks and their policies. Providing you have submitted the offer to the individual in decision-making capacity. Get a name and phone number for the appropriate contact at the lender. Don’t send an offer blindly to a department.
Understand Short Sale Commissions
Regardless of the commission the seller has agreed to pay, the lender is actually the entity paying the commission. The reason is the seller is not receiving any money with which to pay a commission. Since the lender is losing money, the lender will likely negotiate the commission directly with the listing broker, who will then share the commission with your agent.If you have signed a buyer’s broker agreement with your agent, ask if the agent will waive the difference due or you might have to pay it out of your pocket. Some brokers feel it is unfair to penalize the agent, but the lender is calling the shots.
Reserve the Right to Conduct Inspections
Generally, the lender will not pay for customary items that a seller would pay, and the seller is almost always in a position where they are unable to pay for repairs. These include home protection plans for the buyer, buyer credits of any kind and pest/termite inspections. A buyer will be asked to purchase the property “as is,” which means no repairs. GET YOUR OWN INSPECTIONS! It is extremely important that a buyer obtain a home inspection and pay for other types of inspections such as pest, roof, sewers, septic tanks, chimney or fireplace inspections. Do not waive your right to obtain these inspections and make your offer contingent on approving them. Shortsales =BUYER BEWARE!