The Anatomy Of A Short Sale
The Anatomy Of A Short Sale
If you've entertained the idea of purchasing property anytime in the last 360 days than I'd be willing to make a bet that you've come in contact with the term "Short Sale". A short sale, in essence, is nothing more than a glorified term for a pre-foreclosure but with a twist. It's important to be able to recognize a short sale and what to expect when purchasing one. It's been speculated by many U.S. experts in the real estate industry that over the next year to two years there won't be very many listing on the market that are NOT short sales. So what do you say we get aquainted with our new buddy?
What Is A Short Sale Situation?
A short sale situation occurs when a property owner has suffered a financial hardship and finds themselves unable to continue making payments on their home. To avoid a possible foreclosure the seller contacts the bank and submits a letter of hardship to let them know of their financial situation. In most cases, the lender is willing to consider accepting less for the property than what is owed on the UEmortgage under the assumption the property is listed at an appropriate price for a certain length of time. The banks will generally not accept extremely low and unreasonable offers when the property is first listed. They want to see that the home has been aggressively marketed at a fair price first and if it just won't sell then they start to consider lower offers.
Once an offer has been submitted to the bank it is very common that the bank will take anywhere from one to four (and sometimes longer) months. . . yes, I said months. . . to approve or reject your offer. The banks will not counter offer. They will either go with it or not. If you waited three months for a response and they said no, you have the option of either submitting a higher offer or walking away. Please keep in mind that the bank does NOT even have to respond to your offer at all. So you may want make sure in your contract you have some type of clause that states how long you are willing to wait for a response otherwise you could be putting your escrow deposit at risk if you decide to walk.
Recognizing a Short Sale
Recognizing a short sale is an absolute MUST in this market because they are not for everyone and many people are just simply not interested in waiting. Here is a list of common phrases that you might see in a listing description online or on a flyer:
"Subject to bank approval" This basically means that your offer is either going to be accepted or rejected by the bank and the seller does not have any control over it. So if you want to low-ball your offer that's fine and dandy but please keep in mind it's not up to the seller once it's submitted, it's the bank that will be making the decision and they are not known to make quick decisions!
"Third Party Approval Required" This is just a different term variation for the phrase above. It means the exact same thing. The bank is the "Third Party" and must approve your offer. Pull up a chair, make yourself comfortable and be prepared to wait up to four months for a response.
"Listing price may not be sufficient to pay the total of all liens and costs of the sale" As you can clearly see this phrase is letting you know that it's possible you may be responsible to pay extra closing costs at closing that the seller can't pay. I recommend negotiating this in your contract up front and putting some type of limit on what exactly you're willing to pay.
Tips To Help The Process Move Faster
If you are the buyer or buyer's agent it's wise to submit an updated or recent pre-approval letter with the offer as well as a copy of the escrow deposit check so the bank can see they have a serious buyer. It is encouraged to complete all inspections as if it were a normal transaction and have your lender complete the loan package subject push to final appraisal. Other than that your main role is to just wait it out and be a trooper and continue to follow up with the listing agent.
If you are the listing agent you should be aggressively contacting the bank at least once a day to follow up. It would be wise to notify the title company or closing attorney of the short sale and request to accelerate payoff demands. Get from them as soon as possible an estimated HUD 1 statement including payoffs for all liens and distribute a copy to all parties on the contract as well as the contact at the bank.
These are just a few tips to help speed up the process. Remember to be patient, this isn't an overnight transaction. If the price is right it will have been well worth the wait. Now that you know what to expect you can go short saling with confidence!
Written by Erica Muller
www.foreclosuresexpo.com
If you've entertained the idea of purchasing property anytime in the last 360 days than I'd be willing to make a bet that you've come in contact with the term "Short Sale". A short sale, in essence, is nothing more than a glorified term for a pre-foreclosure but with a twist. It's important to be able to recognize a short sale and what to expect when purchasing one. It's been speculated by many U.S. experts in the real estate industry that over the next year to two years there won't be very many listing on the market that are NOT short sales. So what do you say we get aquainted with our new buddy?
What Is A Short Sale Situation?
A short sale situation occurs when a property owner has suffered a financial hardship and finds themselves unable to continue making payments on their home. To avoid a possible foreclosure the seller contacts the bank and submits a letter of hardship to let them know of their financial situation. In most cases, the lender is willing to consider accepting less for the property than what is owed on the UEmortgage under the assumption the property is listed at an appropriate price for a certain length of time. The banks will generally not accept extremely low and unreasonable offers when the property is first listed. They want to see that the home has been aggressively marketed at a fair price first and if it just won't sell then they start to consider lower offers.
Once an offer has been submitted to the bank it is very common that the bank will take anywhere from one to four (and sometimes longer) months. . . yes, I said months. . . to approve or reject your offer. The banks will not counter offer. They will either go with it or not. If you waited three months for a response and they said no, you have the option of either submitting a higher offer or walking away. Please keep in mind that the bank does NOT even have to respond to your offer at all. So you may want make sure in your contract you have some type of clause that states how long you are willing to wait for a response otherwise you could be putting your escrow deposit at risk if you decide to walk.
Recognizing a Short Sale
Recognizing a short sale is an absolute MUST in this market because they are not for everyone and many people are just simply not interested in waiting. Here is a list of common phrases that you might see in a listing description online or on a flyer:
"Subject to bank approval" This basically means that your offer is either going to be accepted or rejected by the bank and the seller does not have any control over it. So if you want to low-ball your offer that's fine and dandy but please keep in mind it's not up to the seller once it's submitted, it's the bank that will be making the decision and they are not known to make quick decisions!
"Third Party Approval Required" This is just a different term variation for the phrase above. It means the exact same thing. The bank is the "Third Party" and must approve your offer. Pull up a chair, make yourself comfortable and be prepared to wait up to four months for a response.
"Listing price may not be sufficient to pay the total of all liens and costs of the sale" As you can clearly see this phrase is letting you know that it's possible you may be responsible to pay extra closing costs at closing that the seller can't pay. I recommend negotiating this in your contract up front and putting some type of limit on what exactly you're willing to pay.
Tips To Help The Process Move Faster
If you are the buyer or buyer's agent it's wise to submit an updated or recent pre-approval letter with the offer as well as a copy of the escrow deposit check so the bank can see they have a serious buyer. It is encouraged to complete all inspections as if it were a normal transaction and have your lender complete the loan package subject push to final appraisal. Other than that your main role is to just wait it out and be a trooper and continue to follow up with the listing agent.
If you are the listing agent you should be aggressively contacting the bank at least once a day to follow up. It would be wise to notify the title company or closing attorney of the short sale and request to accelerate payoff demands. Get from them as soon as possible an estimated HUD 1 statement including payoffs for all liens and distribute a copy to all parties on the contract as well as the contact at the bank.
These are just a few tips to help speed up the process. Remember to be patient, this isn't an overnight transaction. If the price is right it will have been well worth the wait. Now that you know what to expect you can go short saling with confidence!
Written by Erica Muller
www.foreclosuresexpo.com
posted by Totally Florida Staff at
5:54 AM
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