The Scoop On Short Sales
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By Mia Bolaris-Forget
When it comes to finding the right home, we all know that it’s about “location, location, location”. But along with ideal location, often comes a less ideal price tag and perhaps long negotiations and a long, drawn out waiting (and saving) process before you can move into the house of your dreams.
But, this “long”, frequently drawn-out process can be cut down via the short sale. Short sales make it “easy” for home buyers to “score” a deal on a home, usually by giving them the heads up on a homes that are “under-priced”, especially for the area they’re in. Still experts caution buyers to “beware”.
They note that just because a home is listed as a short sale, meaning that a discounted price is being offered on the existing mortgage, doesn’t mean that the lender will say yes, to just “any” bid. And, even if he or she “does”, it’s imperative to remember that the seller must be in default, and must have stopped making mortgage payments before the lender will even entertain a short sale. Furthermore, the seller may be “in debt”, owing more on the home than its worth, with the discounted price reflecting the market value, and not necessarily being below it. And, that may mean, that you may not “really” be getting “that much” of a deal at all.
So, before making a bid or even getting your hopes up, experts suggest spending a little time doing some “homework” (pardon the pun) and having your agent look into who holds that title, if a foreclosure notice has been files and how much is still owed (to the lender); all key points when it comes to figuring out what YOU’RE going to offer.
Note, if the seller had two loans, it’s likely you’ll be dealing with the second. Typically speaking, the first mortgage lender is protected by the second lender, unless the latter refuses to foreclose. This means that if the seller owes the first lender $120,00 and 20,000 to the second lender, you can’t make a bid of $120,000 because that cancels out the loan of the second lender.
This is precisely “why”, say experts, you need to get someone with substantial experience (in short sales) on your side. An agent with short sale experience will not only be familiar with all the “key words and tricky phrases” associated with such a sale, but will have the knowledge and “know-how” to help push the sale along and protect your interests as well.
It’s equally as important, note experts to send your accepted offer to the lender for approval, since the deal is not official until the lender gives his or her thumbs up. You also need to send the lender a copy of your earnest money deposit and expect the lender to ask you to increase it. You can also expect the lender to want a record of your available loan and your preapproval, which is why it’s best to send him or her a letter of preapproval once you’ve been approved. Another helpful “hint” is having your agent forward a list of comparable sales that substantiate the price you are willing to pay for the property/home.
It’s important to not only make and offer and send it, but to base it on the lender’s acceptance, giving the lender a specific time frame by which to respond, otherwise making you free to cancel. Remember, if there is no deadline, there will also be no urgency and your paperwork may just get lost in the shuffle.
Keep in mind that some lenders pass on the short sale to a committee, but more than likely most make a decision in about two to three weeks. But, it’s always wise to get a name and phone number for the proper contact person at the lender.
Another point you should be aware of is that despite the commission the seller has agreed to, the lender is actually the organization paying this fee, primarily because the seller is in severe debt and not getting any money with which to pay the established commission. And, since the lender is taking a hit on the sale, he or she will most probably negotiate the commission directly with the listing broker who will wind up sharing the profit with your agent.
If you signed a buyer’s broker agreement with your agent, you can ask your agent waive the difference since you may have to incur an out-of-pocket expense to pay it. And, remember, that while some brokers may find it unfair to penalize the agent, it’s ultimately the lender that calls the final shots.
Also remember that there will likely be other expenses that it’s not typical for the lender to pay, including home protection plans for the buyer, buyer credits for pest/termite inspections, et al. In fact, the buyer is making the purchase of the home and property “as is” This, alone, makes it imperative for the buyer to get a home inspections as well as other types of customary inspections including tests for pests, roof inspections, inspections for sewers and septic tanks, chimneys, fireplaces, etc. And, remember, regardless of possible being urged, don’t waive your right to these inspections but instead make your offer contingent on getting them approved.
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