Unpredictable Short Sales

Unpredictable Short Sales

Short Sales are homes that are in the beginnning stages of foreclosure, but have not been foreclosed on yet; also known as pre-foreclosure. This can be a time of real hardship on the current homeowner; when the home is going to be foreclosed and they have to move. In most case's the homeowner has been trying to sell the home at a price that they would not have to bring money to the closing table i.e. pay someone to buy their home. Unfortunately, they have not been able to sell the home for the current mortgage balance. The only alternative at that point would be to ask the bank (mortgage lender) to take less money then what they owe on the home. The home owner is still the seller of the home, but the sale is contingent upon the bank taking less money then the original loan amount. The homeowner has to go through a long process of filing paperwork, explaining and proving their current circumstances. Along with that the listing agent must file the correct paperwork to show the market value. The bank will then take several weeks and sometimes months for the bank to process. Hopefully, the Realtor can get a contract that on the home between the current homeowner (seller) and an able buyer. Why did I say able buyer; with the regulations in banking buyers are having a harder time being approved for a loan.
My very first sales transaction was a short sale, I represented the buyer. We had put several offers on homes in this area before finally getting a seller who accepted the contract terms, but it was contingent upon the final approval of the bank. Fortunately, this bank did accept the short sale, and my buyers were able to buy the home at the lower price.
I am currently working on 4 short sale transactions. I am the buyers agent on one of the homes. With today's banking regulations the buyer has to put no less than 3.5% down as the down-payment. We can not ask for no more than 6% in closing costs to help my client with all the fees at the closing table. The home is a good value, listed as one of the lowest priced homes in the subdivision, but it needs about 20k in repairs. The current homeowners are going through hardship; so they can not afford to put the home in a move-in ready condition. The buyer put the offer on the home 40k less than the asking price because of the amount of cash needed to purchase the home. The current home owners did accept the offer but it is contingent upon the banks approval. We will not know if he will actually be able to purchase the home at the short sale price for weeks.
I have 3 other short sale homes where I am the listing agent. One of the homes is a condo in Atlanta. I had a contract between my seller (current homeowner) and a buyer. The seller and I worked closely together to provide the bank with all the necessary paperwork. The buyer was very patient with the bank taking several weeks to give us an answer. The bank came back with a 5k counter offer. Only 5k; the bank would have been able to avoid the foreclosure procedure and get my homeowner out of the loan. The buyer did not accept the counter offer. The home only has six weeks before foreclosure. We need another contract to submit to the bank. This time we already have the sales price with the banks final approval making this home "short sale approved".
The other two homes also have contracts that are pending the banks approval. One of the homes is in move-in condition that is a great deal for the buyer. This home is in a subdivision that has had a few foreclosures at the short sale price but those foreclosures were not in the same outstanding condition as this home. I do believe that the bank is getting the fair market value of the home. The other home is a great investment. It needs some repairs but the potential income that this can produce has value. The subdivision has had foreclosures that are lower and higher then the short sale but with the condition of this property it is a steal of a deal.
We are waiting to see what the bank will do. This is a hard process for all parties that are involved. The seller is going through hardship; they do not know if they will be able to come out from owing on the loan. The buyers waiting with a time limit to see if they are going to be able to purchase the home. The realtors (and their attorney's) for doing a lot of time consuming paperwork; not knowing if they will even get paid for their work. All the parties involved are holding out to just see if the bank will take the lower offer. This takes all of the parties working together to make these short sales a reality, but the whole process is at most very unpredictable.