What is a short sale?
A short sale is real estate transaction is a sale between a potential buyer and owner of a property in which the owner of the property owes more to the bank(s) than the property is worth.
How long do short sales take to complete?
There is no simple answer to this question. It depends on the bank, how many loans there are on the property, how many judgments, liens, etc. It also depends on the listing agent and financial capacity of the owner of the property.
What is a foreclosure property (also known as a “bank owned” or “REO”) property?
A foreclosure property is a property the bank takes back from the owner for lack of payment. The bank then becomes the owner and tries to sell the property on the open market. These are attractive properties because the sales cycle is so much shorter than a short sale. Most people consider these the best deals around, but do to their attractiveness, demand is keeping prices at or slightly above market value.
I am behind on payments. Who can help?
Real Estate brokers have become a great resource for people behind on mortgage payments. When looking for an agent to help, please see our blog post How to pick the best real estate agent for your short sale. https://movetobend.com/how-to-pick-the-best-real-estate-agent-for-your-short-sale/
Which professionals will I need to contact to understand the consequences of a short sale, deed-in-lieu of foreclosure, or foreclosure?
You will need to talk to a real estate broker, loan officer, CPA (certified public accountant), and a real estate attorney. Typically, you need to talk with a CPA prior to considering your options and a real estate attorney once any approval letters or debt settlement agreements have been issued by the bank. A word of caution, you need to completely understand your situation and the outcomes of these options PRIOR to selecting the best option for your situation.
Who pays the real estate commission if I decide to short sale my property?
The banks. If a broker tells you otherwise, get a different broker.
What programs are available to help me get the most benefit out of my short sale?
If you cannot get a loan modification, HAFA is the only program to date which may give you added benefit when selling short. For more information on recent changes to HAFA, see our blog post: The HAFA saga revised: Why the Feds don’t care if you get a short sale. https://movetobend.com/the-hafa-saga-revised-why-the-feds-don%E2%80%99t-care-if-you-get-a-short-sale/
If I buy a foreclosure or short sale property, will the banks or owners do any repairs?
Most of the time, no. We have seen circumstances where banks and/or owners will do repairs. The most important thing to remember when buying a short sale property, the seller usually has no money or financial means to do repairs. They are losing their house and many times, much, much more. When buying a bank owned home, remember this “They don’t care”. As-Is, where-is, buyer beware.
What does the short sale process entail?
1. List the house with a qualified real estate broker and secure an offer.
1a. Prior to, or immediately following listing your house for sale, collect necessary bank required short sale package components (These are very similar from bank to bank, but each bank may be slightly different).
2. Listing broker submits entire short sale package to the lender(s)
3. Lender will begin processing the file and request additional documentation as needed (usually updated bank statements and paystubs) and assign a negotiator who will handle the file. The negotiator is an employee of the lender.
4. Negotiator will order an appraisal or broker price opinion to obtain a “value” for their calculations.
5. After the valuation is returned to the lender, they add it to the package and submit the package to the investor (owner of the loan), for approval (I have seen investors take 10-20 business days to render a decision).
6. After the investor reviews and approves, the negotiator will issue a final approval letter, specifying the terms the bank will require to accept the short sale.
7. Once the listing agent receives the final approval letter, typically, an addendum or email is issued to the buyer’s agent notifying them of creditor approval and thus, removing the short sale contingency.
8. Buyer will schedule and conduct a home inspection. As stated above, these sales are generally “as-is” with no seller repairs, regardless of what the inspector finds.
9. The buyer’s lender will continue with all necessary paperwork and schedule the appraisal (if the buyer is paying cash, this step is typically omitted).
10. Once the inspection period ends and the appraisal is completed, the buyer’s lender will get the final approval from the underwriter and send “loan docs” to the escrow company in preparation for signing.
11. Everyone signs the final documents, the escrow company disperses the funds and records the appropriate documents with the county, title is transferred, and a copy of the final closing statement is faxed to the property owner(s) lien holders.
Side note: It will take the buyer 30-45 days after the lender(s) issues their final approval of agreement to accept the short payoff, for the buyer to complete their inspections, etc., and closing to occur.
Why would a bank even consider a short sale?
Because many times, it costs them less than foreclosing.