SHORT SALE PROS/CONS

[wealthygirl]

We're searching for a home and have seen quite a few (online) that are listed as "potential short sale/subject to 3rd party approval".  Have any of you purchased a home that was slated as a short sale, if so, what are the pros, cons, buying tips, words of advice that you could offer.  Thanks in advance to all who reply!

[Lel]

If you are in a hurry to buy a home, then a short sale is NOT the way to go.  These transactions can take months to close, and after all that waiting the lender may reject your offer for no apparent reason, even if you offer the full listing price.

[Anonymous]

Short sales can make great deals, but it is very hard to get done..

Remember that the listing price is somewhat meanlingless.  The seller will put up a number but the bank may or may not agree to it.  So they may list it at 150K, you offer 145K and the bank counter at 170K.  You just never know.  The bank wants to clear as close to the full retail value as they can, sometimes to the point that getting a deal done is hard.

It can take a week or two between every part of the transaction.  So, when you call about a minor item, repair, need information, etc the wait for a repsonse can be very long.

Multiple lenders:  If there are multiple lien holders on the property (2nd mortgage, etc) the chance of a successful short sale goes down dramatically.  This is because in a short sale, the primary lender gets paid in full before the secondary lender.  If it goes into foreclosure, bot lenders get paid on a percentage basis.  So in alot of cases, in a short sale the 2nd lender gets nothing but if they proceed with foreclosure they will get $.  So if the house is way underwater and has multiple lenders the chances are alot slimmer to get the second lender to approve. 

[kai_1103]

Its been six weeks since I put an offer in on a short sale and the bank hasn't responded yet.  They got a new BPO but haven't review it compared to my offer yet- aparently!

If you want a deal and can afford the time- go for it!

If you are in a hurry- keep looking! Or at least ask the listing agent what the bank is like and how easy they are to work with.

Good luck!! 

[wealthygirl]

Thanks for the good info...

I have my eye on a house that was just listed as a pre-short sale.  Our lease is up in March, if we don't find a house before then, we plan on renting month-to-month so that we can make a quick move if we find what we want.  Not sure if the SS house will stay on the market that long, but i'm hopeful.  Seems like most of the houses listed for SS are not moving off the market (DOM almost 1 yr for a most that i've seen).  Hopefully, there's only one lien on the property.  We'll see

KelayKay---I'd like to track you in your short sale quest...do you mind?

Message Edited by wealthygirl on 10-01-2009 01:13 PM

[kai_1103]

If its PRE short sale, then it will likely take a long time.  That usually means the bank and the home owner are still discussing details.  Pre- foreclosure is usually synonymous with short sale, and usually means they are already agreeing with the bank on some basics to get the SS going.  REO or bank owned means the property is already done with the foreclosure and you get a clean title with no hassle essentially.  But a lot of agents don't understand all this stuff (no offense- there are great agents, too!) so the listing remarks may not be truly accurate, so you may need to dig through public records for details.

Yes I would be happy to tell you what strategy I used with my offer, etc. 

[wealthygirl]

Thanks KelayKay...hoping your SS purchase goes well!

[Anonymous]

I've heard it said you'll only do a short sale once. Haha. I'll be honest, we are in the middle of buying a short sale (which, similarly to your case, was not even listed on the MLS when we offered) and it has definitely been worse than expected. We signed the papers June 30th, and we are currently in "Phase II", whatever that means, and have 45 day lock on our loan at 4.875%. We are PRAYING to close before taxpayer credit ends.

Here are some thoughts:

-If the mortgage is held by Countrywide/BofA, it WILL take at least 4 months, from the time the sellers submit the hardship package. It will probably take longer. BofA is widely known to be the worst bank to deal with, short sale wise.

-At any time, due to loss of paperwork/laziness on their part, the bank can send your file all the way back to the beginning of the process. If this happens to you, it will most likely add 2-3 months onto whatever your time to close WAS going to be. This happened to both my loan officer, and another coworker who happens to be a realtor. There is just no way of knowing.

-MAKE SURE you have a competent realtor, who has handled short sales before. Your realtor needs to get to know your negotiator by name, and call them for updates 2-3x a week. Otherwise, your file will languish in the pile of 90 other short sales that your negotiator is supposed to be handling. 

-As was mentioned above, if there is more than one lien on the house, I personally wouldn't even bother. Our house doesn't have PMI, and it's just BofA in first position. And it's STILL taken this long. 

Bottom line, you absolutely have to be prepared and able to wait this thing out. A month to month lease is really the only safe living option (unless of course you own another home you haven't sold yet). We knew it would take a long time, and it is still a super obnoxious process. I haven't even been inside the stupid house we are trying to buy since June. My husband was talking to me the other day and said something about how the outside was green. I told him it was brown. We didn't even remember what color it was. 

The financing process is kind of awkward too. You don't want to wait too long to get a loan (which, as you probably know, can be incredibly difficult and time-consuming right now), because if the bank approves your offer they want to close ASAP...like within a couple weeks of approving. However, if you get a loan too early, either your credit check or lock or both may expire before closing. 

The whole thing just is really more aggravating than I can possibly put into words. That being said...you can get great deals right now if you can just be patient. That's the only reason we've hung on, is because this house is the only one I've really liked, plus it's an awesome deal. We are still looking around though...because if something else comes up that is just as great, and CLOSEABLE...we're out. 

Seriously, good luck. Let me know if you have any other questions.

[wealthygirl]

Thanks for the great info on the SS process Icinva..lots to ponder!  We discussed going into a month-to-month lease if we don't find anything before March.  I did read that if there's more than 1 lien on an SS, just walk away.  Please keep me posted on the process as it unfolds for you!  Hope it goes well.

wealthygirl

[ShanetheMortgageMan]

If there hasn't already been an accepted offer on the property then figure at least 3-4 months to hear back on if the seller's bank will accept your offer, seller's bank will typically not permit buyers costs to be paid by the seller, and repairs will need to be done by the seller or you (seller's bank will not participate in any of them).  However you can get a great deal on a home, on a short sale of mine the client made an offer for $199,900 on a home that was listed for $190,000, the seller accepted, seller's bank ordered a BPO and it came in at $175,000, the seller's bank then countered the buyer to a $175,000 sales price (but no seller paid closing costs), got the appraisal and it came in at $215,000.