Great Expectations from a Short Sale
February 20th, 2008
A friend of mine called today to tell me about an upcoming offer they were going to make on a Short Sale property. I wished them great success, but there was a lot to prep them for!
They are a young family who are First Time Home Buyers. This market holds great opportunities for these Buyers, and a Short Sale is one avenue.
Now let me tell you about my fears!
Since Auburn, MA is outside my specific service area of towns, I passed them along to a trusted Realtor out there. My bigger worry is the agent for the Seller. They have a home listed for low $300K’s when the “true market value” should be $290,000.
A Short Sale means that the Seller needs bank approval to sell because they are selling for less than they currently owe. It is a way for the bank to forgive the debt and not have to foreclose on the property.
What does the Seller care about with PRICE?? In a Short Sale they will see NADA (aka zip)! They should be pricing at $270,000 and selling it in a day. Then they can start the Short Sale paperwork for the bank to negotiate.
In addition, the home has burst pipe damage and a contractor’s lien of $9000. Boy, the bank is going to be happy to get this one back, right?
The good news on this one… the home is only 5 years old. What could possibly be wrong with it right? Worst case scenerio they have furnace repair, carpet replacement, and replacing water damaged sections of walls. GO FOR IT.
Then the waiting starts!
Banks accepting Short Sales have departments trying to keep up. They are understaffed and undertrained. They leave at 5pm and don’t work weekends. The industry is also changing every day in terms of deciding when to write off bad loans, how it affects the publically traded quarterly reports (translation – stock price), and waiting to hear if the government will bail them out.
So, the Seller calls the bank to get started. A package is sent out to the seller to name all the documents that need to be collected. These include:
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Tax Returns
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Pay Stubs
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Profit and Loss Statement
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Hardship Letters
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Offer from the Buyer
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Pre-approvals
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Settlement Statement showing their Net
When they receive this maybe 2 weeks later, and finally getting around to it, they most likely will have to get a Broker Price Opinion on the home. This is a cheap “appraisal” from another independant Realtor.
The experienced Seller’s Agent would have already had this paperwork part ready, along with comparables for the bank’s viewing pleasure. Most agents don’t!
After a few weeks of poor communication with the bank, my hope is that they decide to sell the home to my friend for a fair price. If you can wait a few weeks (months perhaps) and can handle “not knowing”, it could turn into a real estate goldmine.
Last questions to be answered:
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Any liens on the property?
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Clear title?
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When do home inspections get completed?
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Condition of this usually vacant home while negotiating?
Oh, the joy of getting a good deal! Not for the faint of heart.
Categories: Mortgage Updates, Real Estate
This entry was posted on Wednesday, February 20th, 2008 at 11:48 pm and is filed under Mortgage Updates, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
