Short Sales

[cuzzinolaf]

Anyone here have an experience with short sales? I'm not in the market for a house BUT found one I might not be able to pass up. Currently it is priced $45k or so below what is owed. The owner put about $75k into it since purchasing it in 2005 and I can't find anything that is similar to it in the area.

I will be doing a VA loan and have no worries about getting approved.

The way I understand it is that with short sales the bank has to approve the sale price and the buyer really doesn't care. I want to offer less than they are asking and I hope they might accept since he is 90+ days behind on his payments and just wants out of the house.

Does anyone have any words of advice, thoughts, or experience with this?

 

[Skylar]

Shoot Doospunk a text, he bought his current house that way. I know he is with his brother's bachelor party right now, so I don't know if he will have time to chit chat or not.

 

[Dave_B]

Short sales are pretty much the norm right now. Best thing to do is, submit an offer and wait for the response. If there is just one mortgage on the property, they usually go thru quick. If there's is a second mortgage on the property, it could take months for the short sale to get approved as they basically get sheite.

If you really want to buy it, put in an offer. Just remember, they usually drag their feet and wait for other better offers. Not really legal, but that's the way is is right now. Good luck!

Dave

 

[chords]

I've tried understanding short sales and my take is that there may be a 3rd party (debt holder) to make the final decision on a sale/price and the seller would care, and has some say in the final price to minimize any out of pocket difference.

My only experience is my 2 neighboors. 1 is short sale and the other was foreclosed, house vacated and now thru a realtor

 

[xcr440]

A short sale is the mortgage company taking less than what the current owner owes, releasing the current home owner of ANY liability or deficit payment, just so the mortgage company can get something for a property that they are currently collecting nothing on.

This is becoming more common because so many houses are "under water" right now, and the only way they move is a short sale. It still gives the current home owner a credit hit, but it is a 2 year hit vs. the 6 year hit a foreclosure would.

I'd start low, see if the mortgage company will take it, and up the bid as necessary. Not sure if morgage companies work with you like that, but it won't hurt to find out.

 

[Dave_B]

In a normal short sale situation, the bank is the one who agrees to the sales price. The owner is relieved of the debt/loss and the bank avoids another potential foreclosure. That being said, I've seen banks require the owner to agree to a promissory note for the difference in the amount owed. That is not the norm anymore as the banks just want to get the houses off their books.

Again, alot of the current sales now are short sales and everybody wins.

Dave

 

[anonomoose]

As indicated already, see if you can find out if the owner has one or two mortgages (primary and secondary or equity loan) since the secondary company loses everything in a foreclosure (they are out) there is little incentive for the primary to share other than a few thousand just to get them to go ahead with the deal.

If there is only one company, your road is less difficult.

You will also need to get a written pre-approval for the VA loan, or they won't even consider it.

Then the bank gets an appraisal and it all hinges with that. If you are close they will likely take it, depending upon what area you are in, and how much the home prices are dropping there.

Owner can't get any money out of the deal...basically just a pass thru. Sometimes the owner can kick in...bring money to the closing....just to make the deal, so that is possible too, but usually they have nothing to do that with.

Bank will sit on the deal to see if anyone else comes forward, and this is often the long wait that takes place. They are in no hurry and if a better offer comes along they can take it by terms of their acceptance/agreement that lets them do that should it happen.

The good news is that you can take the shot and have nothing to lose....the bad news is that you are now tied up with that one if another comes along though, in most states you can back out if the deal has not consumated. Still that delay could cost you on another deal.

 

[cuzzinolaf]

There is one loan on this house and I already started the process for a VA Loan. I'm looking to make an offer that is about $25k less than the listed price ($70k less than he owes) and seeing what number they come back with. Hopefully they counter but I really have no clue. I think I would pay up to the asking price but will need to think about it. There aren't many houses in this area with an acre and a half of property that are similar to this house so it is really had to compare. I saw a house in the neighborhood that was easily worth $400k a few years ago that just sold for $198k and is a lot bigger/nicer than this house.

Fingers crossed - I'll probably make an offer on Monday

 

[Sled Solutions]

It all depends on the bank. If you offer to low you'll be wasting the sellers and your time. If it's the first offer on the house as a short sale it can take 3 weeks - 3 months to get a response. If you put a low ball offer in the bank will still go through the whole process of the short sale. They're not going to take just anything for it regardless of how far behind the owner is on payments. Make a fair offer and the process can go quick depending on what lender the house is through.

Good Luck.

 

[whitedust]

It all depends on the bank. If you offer to low you'll be wasting the sellers and your time. If it's the first offer on the house as a short sale it can take 3 weeks - 3 months to get a response. If you put a low ball offer in the bank will still go through the whole process of the short sale. They're not going to take just anything for it regardless of how far behind the owner is on payments. Make a fair offer and the process can go quick depending on what lender the house is through.

Good Luck.

X2 if you really want it make a fair short sale offer or the bank will just shove your offer to the side & you will not hear anything for a long time. If the bank likes your offer they will want to get this house off their books ASAP. Appraisal will tell all so know that no flying by the seat of the pants the bank knows what number they will accept. Hit it & your in. I have seen some high short sale prices when there are 2-3 mortgages...... Good luck!

 

[anonomoose]

thhis is where your broker is going to earn his keep.

He should supply you with VERY current sales comparibles then do as the appraiser will do, and discount for this and add for that. This will allow you to get realistic on your offer....which is critical.

The banks are used to "dreamers" coming along and trying to steal homes....they see it every day of the week and 10 times on the weekends. They aren't very motivated to take a low offer and in all likelyhood....they will just let your offer sit and die...meanwhile you are hoping for the best and waiting and waiting, meanwhile some other shmuck will come along and get better counseling and walk away with it.

As Whitey says, what they "owe" has no baring on the price it is "worth" as determined by an appraisal....from a licensed appraiser.

Get your offer close to what that "market" number is, and you might get it...if your lucky. Otherwise all you are doing is getting your hopes up for a big disappointment.

If you let the home "season"...sit there and it does not sell, then maybe a lower offer will go....in other words, whoever set the price on it, over did it...and caused it to languish on the market for a spell. If the property is in an area of high crime, or every other home is on the market, or if few people are buying....this all tilts the scales in your favor....but if it is not any of the above...you will lose out.

So ask yourself if the home you have found is unique, has attraction by anyone who is looking for the features it has, location, schools, shopping, size...all those things, than do as good a job as you can with things that have actually moved in the same area and you will know what it is worth at the given time you are offering.

That's the smarter way to do it....rather than the noodles stick process you have described above.

One more note: this is no time to get a broker who will tell you want you want to hear....it is a time to get a broker who will tell it like it is...and actually help you formulate an offer that will get the job done....

Of course all of this doesn't take into account anything you need to sell before doing all this....because that changes EVERYTHING.

 

[Dave_B]

Just a quick note to add to what moose said, talk to several agents before signing with one. Most won't touch short sales as they take much longer and require much more work than a standard sale. In other words, it takes tham forever to get paid and they are too lazy to do the work for the possibility of never getting paid if someone else puts in a better offer than yours. Find one that "specializes" in short sales as they will know the ins and outs and prepare you for what to expect throughout the process.

Also, everyone else is correct. Put in a REALISTIC offer, maybe a little higher than you were thinking and then request that the bank pay a percentage of your closing costs. I have rarely seen a bank not agree to as much as 6% consessions on a realistic offer. Make sure you have a legititmate pre-approval from your mortgage company to submit with the offer. Offers that do generally get more serious consideration from the bank.

Good luck!
Dave

 

[Hoosier]

How do you find a candidate for a short sale? Are there reliable listings, or is it more often just something you happen to come across?

 

[anonomoose]

Short sales are always handled by a broker...the Multiple Listing Services also have designations for shorts....

Might be able to find them on Zillow too...

 

[whitedust]

Web sites tell you if it is a short sale or not but don't offer on photos. Shorts are more than likely rough with torn out fixtures & such. When a house goes short the owner sees it as the beginning of the end of the journey of a depleted investment & takes everything with him that is worth a buck. Short sellers that are out are bitter & indifferent since the bank is now in control. Short sellers that are still in the house are more hopeful & the house is in better condition. Always take a look before you offer on a short it will need work.

 

[Dave_B]

Web sites tell you if it is a short sale or not but don't offer on photos. Shorts are more than likely rough with torn out fixtures & such. When a house goes short the owner sees it as the beginning of the end of the journey of a depleted investment & takes everything with him that is worth a buck. Short sellers that are out are bitter & indifferent since the bank is now in control. Short sellers that are still in the house are more hopeful & the house is in better condition. Always take a look before you offer on a short it will need work.

Not so much the case anymore. In the not so disant past, the houses would be stripped of everything. Most of those losers are gone now and we are dealing with people just wanting to get out from under water. Needless to say, go look at the house before you put an offer on it. If anything is missing, copper, siding, door knobs, outlet covers, good luck getting it financed. Someone will come in with a low ball cash offer and it's gone.

Also, short sales are always handeled by a listing broker agency. Most of these have their hands fed by the bank. Shortsale brokers have an inventory coming out of their azz. They could care less about you or your agent unless you put in a legit offer.

I deal with this crap every day. If you have any qusetions. send me a PM. Some people think they know how it works. I live it 24/7.

Again Good luck!
Dave

 

[cuzzinolaf]

The owner is still living in the house and taking care of it. He put a lot hard work and money into the house to make it what it is. I believe it was totally gutted and redone in 2003 (he bought it in 2005) and then he added another $75k or so (I likey the brand new 2 1/2 car detach garage) and updated some other stuff.

I have no house to sell and am in a lease I think I'll have no problem getting out of if given a month or possibly two.

The only thing with this deal I am not sure of is that I'm working directly with the listing agent and don't have my own. Since I'm really not negotiating with the owner I don't see this being a problem. I honestly wasn't even looking to buy anything but this house caught my attention. It does suck that there is NOTHING around anywhere to compare it too. I did find some bigger/nicer houses in a nearby neighborhood that sold for really cheap for what they are and think this might help my situation.

I'm going for another peak tomorrow and will be making a "reasonable" offer instead of a low offer. If I don't get it for this offer it isn't meant to be. My wife isn't working and is going to school full time so this isn't the "right" time for me to buy anyway... but I'll make it work for this house.

Thanks everyone for all of your thoughts. It definitely helped me realize a lowball offer isn't best. I'm even thinking of putting an offer in and saying that it is null and void if I don't have a response in 15 days. I'd hate to forget about this house to have them come back 2 months later telling me OK when I already moved on.

 

[Dave_B]

Here's a good one for you. I had a client put in an offer on a house and gave up after no response. Eight months later, they called him and told him they accepted his offer.

Crazy things happen and, as my dad would say, if it's meant to be, it's meant to be.

 

[doospunk]

.

Good luck Keith! It took us 9 months to finally get our offer accepted on ours. It's all going to come down to the banks decision. Give me a shout if you want to chat about the process we went through.

 

[1blue99srx600]

My sister is currently going through this as she looks for a home. Another thing to keep in mind is, depending on the loan/bank, the $$ you pay for your attorney and inspector before hand just to get the process going may not come back to you in the end. You could do all this leg work and if the bank or banks inspector doesn't like what they see you won't get your $$ back for those things. Again I am not sure what kind of loan that is conventional, FHA. She is dealing with a process called home path where the properties are approved for quick sale and have already gone through all the red tape. www.homepath.com