Listing Agent's first mistake in regards to the home buyer.                                                 

They do little in regards to make sure the lender chosen by the home buyer can perform in a 30 day period. Many big retail banks like Wells Fargo and BoA  take 45-60 days to close and that is if everything goes smoothly.

The listing agent needs to have a lender that can do specialty lending in case the home buyer can not get a traditional loan.

In most cases this deals with properties that have damage. Or there are condos that are considered non-warrantable. They do not qualify for Fannie/ Freddie /FHA loans. The home buyer needs to have options. Have this conversation up front, otherwise it may kill the deal at the end.

THE LISTING AGENT & HOME BUYER NEED TO UNDERSTAND THE DIFFERENT FINANCING OPTIONS

Many lenders have overlays above the seller guidelines from Freddie/Fannie etc. They need to know more than Direct Lending vs brokering. I guarantee the home buyer will not know the difference.  A good listing agent is more than someone who can talk short sales. Understanding the home buyer and their lending situation will definitely keep the red flags emerging at the end.

What should the home buyer do upfront to avoid these issues down the road?

A conversation of what lending programs on the property are potentially available. The home buyer needs to have some flexibility with the type of program they want. Home buyers need to understand the collateral (house) needs to qualify for the loan , as well as the buyer.

Seven Facts Every Buyer Needs to Know about Short Sales

You have heard the phrase "there is nothing short about short sales".  Recently, I received an inquiry from a buyer who was interested in pursuing short sale opportunities that went something like this

"I am interested in short sale properties.  I am a serious investor looking for a home for my wife and myself. If I like the property, I'd offer 30% less than asking price...."

With all the information and misinformation that people are reading in the media, I understand that this buyer is looking for a good buying opportunity. 

Short sales can provide these opportunities but only if they fit the situation and are right for that particular buyer. 

Ii is important that buyers know what to expect and to develop a buying strategy that allows them to reach their goals.  

I suggested a consultation to evaluate this buyer's situation including his needs and preferences and to discuss the ins and outs of buying short sale properties.   

Seven Facts Every Buyer Needs to Know about Short Sales

1.    Properties offered as short sales are typically priced to sell and
       offered at a price below market value.

2.    Low-ball offers don’t get buyers “in the door”. 
       Most likely, the seller will reject the offer. 

3.    Make your offer based on previous sales of similar properties
       in the area. 

       a.    Seller will accept or negotiate your offer.
       b.    Seller’s lender will review and has to approve the contract.  In this
              process, the lender will obtain appraisals and price opinions based
              on previous sales comparables.The lender will present these
              findings to their investors for approval. 
       c.   Seller’s lender has the final word and is not obligated
              to approve. 

4.   Proof of funds (if cash) or mortgage approval are required with offer.

5.  Show seller and seller’s lender that you are serious by making an
     above average “good faith” deposit and demonstrate commitment by
     getting inspections completed.

6.  Short sales take time. 
     Be prepared for additional negotiations with the seller’s lender.
     The entire short sale process could easily last from 2-6 months.

7.  There is no guarantee for the successful outcome of a short sale
     offer even if seller and buyer agree on all terms. 

Because of the substantial time commitment and involvement by buyer, seller, agents, title companies, attorneys, and lenders, contracts submitted for consideration need to be such that they have a reasonable chance of success. 

Anything else will not be a productive use of your time and resources.

Seven Facts Every Buyer Needs to Know about Short Sales

Are you a buyer interested in deals, opportunities, or distressed properties in Spring Hill, Florida?  If so, please contact me to find out what type of properties are available in the current market and how they could meet your needs and preferences!   

 

 

 

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For more information about Hernando County Homes and Land for sale including Spring Hill and the communities of Timber Pines, Glen Lakes Golf and Country Club, Silverthorn, and Hernando Beach , please call or visit my website!

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All content, including text and photographs, is the exclusive property of Silvia Dukes, P.A. and may not be used without expressed written permission.   

Agents frequently ask me about the property taxes associated with a short sale. Should the seller pay the property taxes? What happens when the lender escrows property taxes? What happens to the defaulted property taxes? 

The good news is that these are easy questions to answer.

When a short sale package is submitted to the bank, the short sale package includes an estimated settlement statement. The estimated settlement statement (also known as a HUD-1) itemizes all of the costs associated with the short sale through the projected closing date.

A savvy escrow officer, title officer, listing agent, or short sale processor will investigate the amount of property taxes owed on the property and include those taxes on the estimated settlement statement that has been submitted to the short sale lender for approval. (This information can usually be found on the Internet by checking out the city or county tax rolls. Or, you can also find the information on a preliminary title report.)

In our experience, the short sale lender generally pays the property taxes out of their proceeds. Why wouldn’t they? If they foreclose, they will have to pay those taxes anyway.

However, what happens if the property taxes were not calculated correctly on the settlement statement or if new property taxes suddenly appear either on the title report or on the tax rolls? 

Well, there are two options here. The first option would be to return to the short sale lender and request that the lender pay those property taxes. Another option would be for the seller or another party to the transaction to pay those taxes.

The key here is to not find yourself in that position. If you do your due diligence (your homework) and research and calculate correctly at the beginning of the transaction, you will not be short any money for property taxes when the short sale approval letter finally arrives in your email inbox.

Just imagine: you may actually get that short sale closed!

 

Photo: flickr creative commons by images_of_money

 

 

Melissa Zavala 
BROKER/REALTOR® ● DRE #01324959

BROADPOINT PROPERTIES, INC. 
760.839.3838

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Thinking of buying a short sale property?

Then you'd better understand what a short sale is, and what it will take to close that deal.

My buyer was looking for a good buy --- not merely a good deal -- but a good buy. Based on his criteria, I told him about several listings that may be suitable. The best one in terms of location, condition, amenities and price was a short sale.

Before writing an offer, I had to set expectations by first educating my buyer on short sale basics from a buyer's point of view.

What's a short sale?

Generally, it's a sale wherein the seller is selling the property for less than what is owed. And as such, the seller's lender will have to approve the sale, price, terms and conditions.

Who accepts the offer

The seller still decides whose offer to accept. Most lenders will only want to look at the best and highest offer. In multiple offer situations, highest offer doesn't always win -- which may be true with regular sales and foreclosures, too. The onus is on the seller to choose/accept the offer which has the best chance of getting approved by the short sale lender.

What are the terms and conditions that a short sale lender is likely to approve/disapprove?

Every short sale lender is different. But there are certain elements that are quite common.

Price. An offer that is too low or below the investor guidelines is likely to be rejected or countered. Just because it's distressed or a short sale doesn't mean the buyer can get it with a significantly low-ball offer.  You can deal, but not steal.

Find out how much is owed and to whom, check the comps in the area. Then go from there.

Close of escrow: For example, when the short sale lender grants approval, the lender typically sets an aggressive closing date, usually within 30 days. This makes it challenging for an offer with FHA loan and its 45 days or longer escrow period.

HOA: The lender may also refuse to pay for HOA documents, fines and delinquent fees. If the seller is delinquent, buyer (and seller) may be requested for a contribution to satisfy these demands.

Credits: The lender may also refuse to give credits for closing costs, repairs, replacement and/or warranty.

What does the buyer need to know?

Who is the lender? Some lenders are a lot harder to work with and may take longer than others to approve a short sale, while other lenders (like Wachovia) have a good track record of closing short sales.

How many liens are there, and are they by the same lien holders? Having one lien holder is tough enough. Having two is tougher. But when there are different lien holders, it can become extremely difficult to negotiate the short sale.

Liens against the property can be by anyone besides the banks: utility companies, the IRS, mechanic's liens. Each one of these has a claim against the property and has to be satisfied. If the seller is totally insolvent, the bank may need to offer payouts to these lienholders who may refuse or negotiate for more.

DOES THE AGENT HAVE SHORT SALE EXPERIENCE? 

It makes a world of difference to work with a listing agent who has a track record of successful short sales. That agent knows what to do, and can avoid pitfalls and delays in the process.

By the same token, the buyer's agent must also have short sale experience to guide the buyer how to write an offer with a good chance of getting the short sale accepted and approved.

What notices has the seller received?

Notice of Default?

Notice of Trustee Sale? If the seller is just days away from being foreclosed, there may not be enough time to do a short sale.

Inspections and reports. If there are none, by all means, get them during your buyer investigation contingency period. With so little room to negotiate, the buyer must have all pertinent information to determine if he is getting a good value with the purchase.

Condition of the property. If there are safety hazard issues, the buyer may be able to justify asking for credits or repairs for a loan to be approved. For example, lenders and their appraisers may look for a functional kitchen which generally means having a working stove. There must also be a functional heating system.

How long will it take to get a short sale approved?

There is no one answer to this question. It's not unusual to wait 3-6 months, or even longer. It all depends on the lender, the situation, the market, the completeness of the short sale package, the willingness of all parties to negotiate and/or contribute. This where one must have patience, persistence and perseverance.

Can a buyer continue to look and write offers on other properties?

A buyer can...but this could also mean that the buyer was not acting in good faith when he wrote the offer on the property.

Good faith is defined as: Effort made, information given, or transaction done, honestly and without a deliberate intention to defraud the other party. However, good-faith does not necessarily mean "without negligence:. Also called bona fides, it is implied by law into commercial contracts.

Can a buyer walk away?

After offer acceptance: Like any sale, there are contingency periods after acceptance (or approval by the short sale lender) during which time the buyer is expected to do his due diligence in terms of buyer investigation, loan appraisal and loan approval.

Before offer acceptance: In several states, a buyer can stipulate how long his offer is good for.

For example, in California and per our short sale addendum, the buyer can specify that his offer is good for 45 days or longer from the time the seller accepts his offer until the time the short sale lender approves the short sale. If no approval is forthcoming, the buyer's offer expires.

There are NO guarantees.

 BOTTOM LINE

If a buyer doesn't have the patience, perseverance, motivation and/or the time to wait...

Then the buyer should NOT buy a short sale.