Short Sales & Bank Owned
SELLING YOUR HOME WITH A SHORT SALE
YOU ARE NOT ALONE!! The experts all agree short sales are on the increase. Many more homeowners qualify for a short sale than ever before. You can even purchase a home immediately after a short sale, and possibly put up to $3000 in your pocket. You can avoid foreclosure and your credit can be saved. Through my years of experience handling short sales and bank owned properties, I've found homeowners have more misunderstandings, fears and questions than answers.
A short sale can be an excellent solution for homeowners who want or need to sell, and who owe more on their homes than they are worth. Today, banks and lenders are very cooperative and even enthusiastic about homeowners doing short sales.
· A homeowner is 'short' when the amount owed on his/her property is higher than current market value.
· A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage.
This may seem simple, but it is a complicated process that takes the expertise of an experienced professional. I have the Short Sale and Foreclosure Resource from the National Association of Realtors. This means I have more experience and expertise than most. I’ve successfully negotiated short sales over the past few years. Many of my clients have received $3000 to move.
PURCHASING BANK OWNED AND SHORT SALE PROPERTIES
The normal transaction today is either a short sale or a bank owned property. (Also known as REO’s, bank owned, lender owned, foreclosures.) The process for this type of transaction is more complicated than a traditional sale.
Bank Owned
You can expect significant differences in a bank owned property. First of all the homes are sold as is. No repairs will be made. The banks chooses the title company and the date of closing. If you do not close on time, you will probably be fined $100/day. If the bank doesn’t close on time, there are no fines or penalties. There are usually multiple offers on REO’s, with the selling price oftentimes above asking price. Asset managers are looking for the best net on a transaction. Most government backed loans, such as Freddie Mac, Fannie Mae and HUD, have a window of about fifteen days where only owner/occupants can make offers on these properties.
You must provide proof of funds to purchase the property. This is for not only a full cash offer, but for the down payment and closing costs. Many asset managers will want to see your bank statements to determine if you are a fully qualified buyer.
Once your offer is accepted, the bank will then send an Addendum. This Addendum changes many aspects of the contract. All parties need to read this document very closely. Once you’ve accepted the Addendum and submitted it with your signartures, the bank reviews it again. They’ll then sign it and the actual escrow period begins. At this time, escrow is opened, inspections are completed, the loan process begins (if any) and in about 30 days, the closing occurs.
Short Sales
The contract does not go into effect until the bank has accepted the selling price. This usually takes at least two months. The asking price in the MLS is usually an educated guess by the listing agent.. They are given no guidance from the bank on this price. I’ve seen the asking price go up, but never down.
The bank is going to demand certain paperwork be signed and notarized. They will not close the transaction without it. You’ll be signing that the sellers and buyers are not related; that the sellers are not staying in the property; and that the sellers are not receiving any funds under the table for the transaction. Both Realtors and the title company must sign this, as well.
Once the price is accepted by the lien holder(s), escrow will be opened, inspections are completed, the loan process begins (if any) and in about 30 days, the closing occurs. Short Sales routinely take about three to six months.
