By now everyone has heard of Short Sales. Just a few years ago, it was a word rarely used in Real Estate. But today it is a widely used term......sometimes even mis-used. Let's review what a Short Sale is. A Short Sale is when a lender agrees to allow a seller who has a financial hardship to sell their home for current market value...taking a loss on the original mortgage and allowing the homeowner to sell their property "short".
So what does this mean for a buyer buying a Short Sale. Here are some tips!
1. If you are a buyer.....before entering into a short sale contract, ask your Realtor to do "due diligence" with the sellers agent if property is listed. Find out how many liens are involved. This could make a difference of 60 days or 6 months waiting time for the seller to receive an approval to sell short. Each lien will need an approval. Short Sales have come a long way since last year and the wait time has decreased on some, but there are still those difficult ones that can take time..and here is a footnote, if there is an IRS lien or a divorce involved it can mean increased time for approval.
2. Make sure the seller is not trying to do a loan modification at the same time they are trying to sell. Some sellers get desperate and may be trying everything. While having their property listed, they may also be trying to do a loan modification. Sometimes the sellers lender does not know what the leftt hand is doing. If the seller gets the loan modification, they will cancel the short sale ad you are back to square one. Hey, it happens.
3. Most short sales are sold as-is....so a buyer will need to do a Home Inspection early...to see if this is a property that is worth the wait. I have seen buyers wait 6 months for the sellers approval and then do the Home Inspection, only to find that the property was not worth it.
4. Check the comparables.....make sure your Real Estate Agent check the sellers agent comparables to ensure the listed price isn't one that is used just to lure buyers in for a quick contract to keep the sellers home from going into foreclosure. Example: You are pre-approved for only $150,000, and the short sale list price is $150,000, however the area comparables say the homes are going for $180,000...the sellers lender may come back to ask you to increase your offer to $180,000..but you can only borrow $150,000...causing you to have to walk away after waiting a long period of time. Know the comps of the home you are buying!
5. Make sure the seller will move. Some sellers get real comfortable after realizing that it could take months or years for their home to actually foreclose. During that time, many are paying no mortgage and some "dig their heels in" and wait until the very last moment to move out. Hopefully you will not get one like that!
6. Patience....it takes it..but the end result can be worth the wait.
Being a Realtor we often have to be all things in a transaction. Today I am asking for a break from all Loan Officers working with Buyers or potential Buyers. When qualifying the client , speak in terms the buyers can understand. Many will not ask questions because they are too embarrassed to appear that they are not getting what you are saying. But most do not understand, how do I know? They call me to break it down in terms they can understand.
I know in this industry like most industries we have our own terminology. Sometimes we need to slow down and remember that we are talking to someone who may know nothing about financing a home. The breakdown in communication can cause lots of confusion. New buyers especially have a hard time understandings things such as points, how property tax credits work, APR, debt ratios etc. Slow down and pretend you are talking to someone who knows nothing....it would help us all!
Buyers often have a lot of questions when making decisions on purchasing a home, whether they are first time or repeat buyers. As Realtors we often find ourselves answering questions that fall outside our expertise because one or more of our transaction partners may be too busy take our client call or the clients feels more comfortable with their Realtor and feel as if they can ask them and get an answer they understand, often intimidated by the language and terms of transaction partner.
Let's pretend to be a buyer and play Twenty Questions (really 6).Tell me which is the right person in a transaction of buying a house should answer the question. Get as many as you can right and you may win the house of your dreams, but call your Realtor! LOL!!!!
A. Realtor B.Loan Officer C. Attorney
The answer key is as follows: 1.B 2.C 3.C 4.C 5.B 6.C Congratulations if you got them all right, if you only got one or two correct, call your Realtor!
As a Realtor, I get this question all the time....are there any grant programs available to help me purchase a home? Of course, if I am aware of one, which I usually am....I share this information with the buyer especially if they need assistance with down payment, closing costs or property tax reduction, after all as a Realtor I want to help my buyer realize her dream. The next question I usually get, is how come myMortgage Loan Officer did not tell me about it?
Good Question..how come? Most Loan Officers are looking for a quick close......and most grants require waiting for approval from whomever is providing the grant. There are many programs in most states that are receiving money from the federal government to help buyers who need help.
I was reminded of this today from one of fellow Realtors who had a listed property that my buyer was interested in, but the high property taxes were a concern that would make her payments higher than she could afford. After expressing this to the listing agent...she came back quick with the answer,t"here are lenders who provide MCC Tax credits".....who? What? What are you talking about Willis? To make it even better for my buyer, one of the lenders was the one she was pre-approved by. Back to my original question, why didn't her Loan Officer tell her about this, knowing that she was looking to buy in a low price range, knowing that high property taxes could disqualify a lot of homes for the buyer? Why?Why?Why?
There are many types of Realtors. Many sellers don't know this....they assumed that if you are a Realtor you should know what you are doing. But just like all professions, Realtors come with many specialties. We live in a age of many distressed homes, that needs agents that can help them navigate through the minefield of a short sale. The wrong information can kill a deal or worse, send a home into foreclosure.
Short sales will continue to be a big part of Real Estate as more and more homeowners find themselves under water and looking for a bail out. With the help of the Home Affordable Mortgage Program (HAFA), it is becoming easier and easier for a seller to bail out through a short sale.
But is your Realtor adequately trained to handle this business? Do they know the difference between a recourse or non-recourse loan? Are they aware of the financial ramifications of a short sale or do they have the adequate resources to help a seller know the financial ramifications.
If a Realtor is not adequately trained in handling short sales or REO's sales, should they fully disclose this to their client? If not, they should seek the help of their manager or refer the sale to an experienced agent in this area. If not, there are so many risks involved for the seller and for the agent if the transaction goes wrong. Article 11 of the Realtors code states that Realtors should not undertake to provide specialized services if it is outside their field of competence. Sometimes it is not all about the money!
 |
|
|
Specialize in Foreclosures including Bank Owned, REO's,Short Sales, Pre-Foreclosures in the Southeast Suburbs of Chicago Illinois and surrounding areas.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2012 ActiveRain Corp. All Rights Reserved
