Besides listing and selling dozens of short sales over the past 4 yrs or so I have assisted several buyers. Short sales are a great option for buyers to consider. The key is how the contract is written.
First of all, on short sales, DO NOT expect the seller or sellers lender to do repairs. It will not happen. Do put in as a contingency any and all inspections you might as a buyer would want. For instance we always ทาวน์โฮมมือสอง กรุงเทพ suggest Physical Inspection, Termite Inspection, Roof, Fireplace, Lateral Sewer, Foundation if on hill or there is severe cracks in walls and foundation, HVAC to name a few. ASK for credit towards buyers closing costs up front. Do NOT expect sellers lender to provide a first year home warranty.
OK so you found a home, you love it, it is a short sale and you put in offer. The sellers lender comes back within 3 to 6 weeks and says accepted. You have inspections. Termite shows $10000 worth of damage you were not expecting...Should I cancel contract or what? What you should do is bring in 2 more bids for cost of work to be done in writing, on Licensed vendor letterhead along with pictures and submit to listing agent to send back to negotiator for review. Do not expect the lender or seller to repair BUT you can ask the sellers lender to reduce the price accordingly. Depending on how much credit back you asked for upfront will depend on whether you can just ask back as a credit towards closing costs.
Remember your lender has standards. Many lenders will allow up to 6% credit back towards closing costs. Any amount above that would have to come off purchase price. What the negotiators will not tell the listing agents is that they usually have set aside a fund to address items found on inspections. The listing agent has to ask for credit back and/or a reduction in price but also has to provide proof of cost of repairs along with pictures. The negotiators know if the house is put back on market those items in need of repair or treatment will have to be disclosed to next buyer. Most of the negotiators will go to bat and get the credit and/or get the purchase price reduced...Some investors who hold the notes will just state put it back on market or foreclose on it(The INVESTORS make the final decision in most cases).
I have successfully negotiated on several short sales a reduction in price and/or credit back to buyer when presented with written bids on LICENSED vendors letterhead as well as pictures. I will also redo comps to show negotiator other like homes in good repair and condition selling for much higher or at original purchase price of short sale property and that this must be taken into account. It is not an automatic and sometimes we go back and forth but as long as there is strong documentation a buyer can expect to at least obtain credit to closing costs.
A buyer SHOULD NEVER ASSUME when there is a written short sale approval that the trustee sale will be postponed and then dilly dally around with a lender who does not move quickly to get buyers loan approved and close escrow in a timely fashion. That is Russian Roulette in Short Sales...The investor(s) have final say and if they feel they will profit more by foreclosure they will just tell the negotiator that they are foreclosing. While in most cases we can get an extension for close of escrow there has been circumstances where an extension was not granted and house foreclosed. In essence what I am saying is this...if you are a qualified buyer and serious then PLEASE get a pre approved loan UP FRONT before making an offer SUBJECT to satisfactory appraisal and ratified contract.
Stay on top of your loan officer. Be prepared to move quickly, provide documentation as needed in timely fashion. In terms of offer price, typically the sellers lender is looking for fair market value. So if the comps of similar homes and sq footage is selling in the area for $350000 don't go in at $299000. I guarantee you will be countered or purchase offer denied. UNLESS there is something seriously wrong with the home don't go for the jugular. Sellers lender will do their own appraisals and broker price opinions. What may make sense to you in terms of bank not foreclosing on a property...well... stop thinking that way...The majority of my short sales came to a successful conclusion.
The ones I had problems with typically needed a lot more work than the market was willing to pay for the home. Investors felt foreclosure would bring them more relief than short sale in those cases.
In Summary: short sale listings should be considered by buyers and they do close and most are closing in today's market within 6 weeks to 3 months or less from submission of buyers purchase offer. HAFA short sales have been taking longer on approval. Depends on whether the banks are using third parties to negotiate and whom those 3rd parties are. Short sales will still be around for a few years and that is why I am writing this article. Do not automatically pass them up.
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