Buying a Phoenix Short Sale
Who doesn’t want to have a good deal? I enjoy a good deal every now and then. Sometimes I buy something I know I shouldn’t because it is way overpriced, but I needed the phone. I swear I did. I’ll move on by saying that short sales are a good deal, but like every good deal you need to read the fine print. When you see a home that has a listed price that looks low for the neighborhood before you do anything you should have your realtor (Me) call the listing agent to see if it is a short sale. Why? Because short sales are very demanding and need lots of attention.
Quick Overview of Short Sales
Most of you probably know what a short sale is and I know I’ve mentioned it quite a few times on the blog, but I’ll do it again just for good measure. A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage. Lenders don’t accept all offers and that is where the negotiation comes in. Enter Me.
The seller doesn’t have to be in default or late on their payments to go through a short sale. It’s possible that the lenders will accept a short sale because the value has fallen. The seller may owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.
Public Record Check
Research is necessary. Always. I will do mine and you should do yours. Among many other things I will find out who is in title, whether a foreclosure notice has been filed and how much is owed to the lender(s). The amount owed is important because it will help you to determine how much to offer.
Problems arise when there are two loans. I’ve seen it happen many times. If a seller owes $200,000 on the first and $60,000 on the second, offering $200,000 leaves nothing for the second. The first will need to give something to the second to gain its cooperation. Definitely should stay away from short sales with two loans.
Experience a Must
It’s one thing when your listing agent has never handled a short sale, but if the buyer’s agent hasn’t either then you are in a world of hurt. It’s called growing pains and it hurts. Experience is definitely a plus (I have experience by the way, in case you were wondering).
First major difference between experienced and inexperienced is a quicker transaction and the second is negotiation skills protecting your interests. It’s my job (if I was your realtor) to make sure you are informed and everything is going smoothly. You’d be surprised to know how many people hate their jobs in the real estate business especially loan officers and the title company employees and they are the most important ones. They keep your file moving along.
Qualified Short Sale
If the seller has no equity and is unable to repay the difference between your sales price and the existing loans then a lender is likely to agree to a short sale. The hardship letter is the most important thing the sellers need to provide to qualify for a short sale. I explain that in another blog. Also many other things regarding short sales. Please feel free to look around.
Sellers should not receive a dime from the buyer just so the seller could give the buyer first dibs on the property. That would constitute fraud. Stay away from those type of people. You don’t need to be a part of that. The seller should receive no money because the lender is losing money on a short sale.
Purchase offer and other Documents
Sellers really have no say in the matter regarding purchase offers. The lenders call all the shots. If they accept get ready for a fun ride. The rest of the real estate purchasing ensues and your agent’s time will be spent dealing with the lenders on everything. For example, the earnest money deposit. Do not be astonished if the lender asks you to increase it.
You will have to go through the loan process per a usual transaction. Hopefully, a good company that will work with you and your agent.
The Response
Wait and wait and wait and…nope keep waiting.
Some lenders submit short sales to committee, but most can make a decision within two to three months. Get a name and phone number for the appropriate contact at the lender. Don’t send an offer blindly to a department or that paperwork is gone for good.
Commissions
The lender will pay the commission. Why? Because the seller receives no money to pay a commission. The lender will likely negotiate the commission directly with the listing broker, who will then share the commission with your agent (lucky me right?).
If you have signed a buyer’s broker agreement with your agent, ask if the agent will waive the difference due or you might have to pay it out of your pocket (Ask and you shall receive). The lenders penalize us for reasons I can’t explain. Don’t worry, I don’t like them any more than you do.
Inspections
The lenders usually doesn’t pay for anything that a seller would pay in a normal transaction like home protection plans for the buyer, buyer credits of any kind and pest / termite inspections. A buyer will be asked to purchase the property “as is,” which means no repairs. With that being said PLEASE because this is extremely important obtain a home inspection.
Thank you for your time. Bye.
