Buying a short sale..

[tonypeoni]

I have had earnest money on a short sale for some time. The realtor called me today to let me know that she checked the status of the offer and found that the bank no longer held the mortgage. They sold it. Now Im mad because Ive wasted 80 plus days waiting around and letting other properties pass by. I know short sales take a LONG but this is nuts. The way I understand short sales is the lender can write off a certain amount per month then when they have exhausted that they normally sell in the form of a short sale or foreclose. Am I wrong in assuming that Im back to square one and this new lender has another 14 months worth of write offs before they will consider a offer? BTW my offer was the asking price of the short sale.

[look 171]

From what i understand, you almost have to be the first one to make the offer when it comes on the market. They are looking at your qualification and if its an all cash offer. Then they go from there. There are a lot of BS who you know going on there, I feel. I have lost a few of them that way. All our offers were over the asking.

[tonypeoni]

Originally Posted by look 171

From what i understand, you almost have to be the first one to make the offer when it comes on the market. They are looking at your qualification and if its an all cash offer. Then they go from there. There are a lot of BS who you know going on there, I feel. I have lost a few of them that way. All our offers were over the asking.

This just sucks.. I want my $1000 back Yes Im financing but a excellent applicant. Some say why per sue a short sale when there's so many existing houses on the market? Well existing homes are overpriced I feel in this part of the country. A 2500 SQFT existing home sells for about $200k in the this area and is often needing a new roof, carpet, kitchen, ect. You can buy a new 2500 SQFT home for 235k. It just makes more sense to buy a new home at that point. But some of the short sales however are nice homes for the money.

[look 171]

I am a big fan of buying at the cheap and make it your home after its your. Just have some money set aside for the remodel. Keep at it, everyone is after a good deal.

[Jim Richards]

A couple of years ago, we had an offer in on a short sale. After waiting months, we finally decided to punt and move on to a regular sale.

[ramonesfreak]

Originally Posted by look 171

From what i understand, you almost have to be the first one to make the offer when it comes on the market. They are looking at your qualification and if its an all cash offer. Then they go from there. There are a lot of BS who you know going on there, I feel. I have lost a few of them that way. All our offers were over the asking.

This is not quite correct. You as the buyer are responsible for getting your financing secured through a lender. The owner of the Note in default doesnt care about the buyer's qualifications because you either have your financing or you dont. The owner of the Note will receive their cash from whoever you secured your financing at closing.

Many defaulted Notes have certain restrictions placed on the Note by the investor or owner of the Note. For example, there are restrictions limiting short sales to family members, requiring that the property be listed by a real estate agent for 90 days prior to short sale approval etc...

Always ask for proof that the owner/holder of the Note has "approved" a short sale and ask for it in writing. This written document exists and I would ask to see it before I made an offer and wasted my time.

When you see a house listed and it mentions a short sale, that does not always mean that a short sale was approved because as i said above, the seller may be required to list the property for x amount of days before the owner of the Note will even authorize the possibility of doing a short sale.

Obviously most of the precautions and restrictions are to limit sellers committing fraud

[fintstone]

I was the first to make an offer on a short sale...full price, cash offer. It was rejected and the home sold to another person for about $100,000 less. Every one of these that I have any personal knowledge of have been a scam in some way...so I am not playing any more. I am only looking at repossessions like Fannie mae or regular sales. It is just not worth the waste of time to me.

[vonsmog]

Bankers are crooks and lairs, just like politicians. I purchased a building from a bank once that had written a $780k note on a refi. And the guy took the cash and booked! Of course he was once the mayor of the village, like I said politicians. Anyway the guy who wrote the note, was in charge of disposing of the property. Held it for four years before the higher ups found out about the "mistake" as the one guy selling it called it. I ended up paying $215k and ran my business out of it for eight years and then sold it for close to $500k. Oh, the guy who wrote the note, and a few others all got fired! There "mistakes" just caught up to them.

[Hugh R]

I bought a short sale condo last summer in Oxnard, CA. Took forever. Offered full bank asking, no contingencies. I don't know why it took like 4 months.

[Wilywilly]

I've bought three of them in the past 4 years. Two problems as I see. First each bank has one or more admistrators who handles the overall shortsell. They are compensated piecemeal and have no incentive to rush a particular one along other than with a sweet sucking up realtor. They usually get blocks of short sellls to administrate 50-100 at a time. The other problem is that several different parties are involved in the short sell and they all have to sign off on it. The bad loan orginator, the current note holder, the servicor and the worse of all the investor (the guy representing the bond investors that the note is part of in the secondary market). They don't care if it's a cash deal or not. With all the delays there is plenty of time to secure financing. Some real good deals out there but you have to be patient and persistent.

[tevake]

The short sale process is FUBAR as for as I am concerned. We lost out on a deal last year for a condo here on Kauai. Our all cash offer lost out to a lower offer that I think was financed. Turns out that when it was re-listed after falling out on a previous deal that the bank took 6mos to decide on. By the time they decided the buyer had moved on.
Then they re-listed it as for sale. We saw it the second day of that listing, made a cash offer the next day for asking plus cash to the seller for furniture that we didn't want. Only to find out that they had a back up offer from the previous deal that they went with.
I guess with out even looking at our offer. No wonder the banks get into trouble, and this is playing out all over the country. Imagine their losses. I think there is government subsidy for these losses. Why bother working for the best deal if the money is going to come in anyway?

Cheers Richard

[ramonesfreak]

the short sale is nothing more than a foreclosure alternative requested by the defaulting homeowner. when in foreclosure, (in NY) you have options to modify the loan, deed-in-leu, cash-for-keys and short sales...if the homeowner doesnt qualify for a modification, and it benefits the owner of the Note (bank) to approve a short sale, then they do (subject to investor restrictions). I see many short sales close without issue and quite a few fall apart usually when its discovered that the seller is trying to sell to his kid or other family member...or, more typically, when the bank's appraisal comes in at a higher value than the seller's appraisal..in which case, it makes no sense for the bank to approve it

[drcoastline]

I am a licensed New Jersey Real Estate Broker and the house I currently live in I bought as a short sale. To answer your first question yes you are at square one. Short sales are a LONG process and the reply may be equally long.

First thing you must realize is the bank has lending laws and owners right to contend with. I am not going to go into the owners rights but suffice it to say that in it's self is a long process.

The process generally goes like this.

1. An earnest effort to sell the property at fair market value must be made. Each lender will have its own time frame to satisfy this requirement but a six month listing is the shortest I have ever seen.

2. Generally if a borrower is not behind in payments a lender will not even look at a short sale offer.

3. if the buyer accepts your offer the lender must approve the offer. This can take some time and may need multiple approvals. If a lender does accept the offer usually they will require a closing within 30 days of approval with out any contingencies. If you go past the deadline the acceptance will be void and you start over. If you get lucky and have a good credit counselor at the lender you may get one extension of a week or so before the approval cancels. So make sure all your inspections, mortgage approvals, etc. are all in order.

4. If the loan sells you start over.

5. The difference between the loan balance and the sales price is considered income to the seller and they will receive a 1099.

The reason it is so strict is one. The bank is obviously losing money on the short sale and wants to get every penny they can and two in every case I have seen the borrower is behind so the bank has foreclosure proceedings they must follow. If those proceedings are not followed they may be required to start over causing the foreclosure process to be prolonged.

That's the abridged version.

[GWN7]

Thanks for the explanation. Up here the real estate laws are very different. I've often heard the term short sale but never knew what it ment.

But why is it called a "short sale" if it takes so long?

[tonypeoni]

Originally Posted by drcoastline

I am a licensed New Jersey Real Estate Broker and the house I currently live in I bought as a short sale. To answer your first question yes you are at square one. Short sales are a LONG process and the reply may be equally long.

First thing you must realize is the bank has lending laws and owners right to contend with. I am not going to go into the owners rights but suffice it to say that in it's self is a long process.

The process generally goes like this.

1. An earnest effort to sell the property at fair market value must be made. Each lender will have its own time frame to satisfy this requirement but a six month listing is the shortest I have ever seen.

2. Generally if a borrower is not behind in payments a lender will not even look at a short sale offer.

3. if the buyer accepts your offer the lender must approve the offer. This can take some time and may need multiple approvals. If a lender does accept the offer usually they will require a closing within 30 days of approval with out any contingencies. If you go past the deadline the acceptance will be void and you start over. If you get lucky and have a good credit counselor at the lender you may get one extension of a week or so before the approval cancels. So make sure all your inspections, mortgage approvals, etc. are all in order.

4. If the loan sells you start over.

5. The difference between the loan balance and the sales price is considered income to the seller and they will receive a 1099.

The reason it is so strict is one. The bank is obviously losing money on the short sale and wants to get every penny they can and two in every case I have seen the borrower is behind so the bank has foreclosure proceedings they must follow. If those proceedings are not followed they may be required to start over causing the foreclosure process to be prolonged.

That's the abridged version.

Thanks for the clarification. The realtor assures me Im not a square one and that this new bank just wants the property off their books. Seems the original bank is in bankruptcy and they picked it up in a bundle purchase. She thinks this is not a very good prospect for them to hold on as this home in a undesirable area. Keeping my fingers crossed!

[drcoastline]

Banks, mortgage companies are in the business of lending money and collecting interest. They are not in the real esate investment business or property collection business. They don't care if the property is in the best or worst neighborhood they want it off their books as quickly as possible for as much as they can get. The longer they hold it and have to pay taxes, attorney fees, processing, etc., etc. the more they lose.

Rest assured you are at the beginning if you are dealing with a new lender. New lender new credit manager. What you may not need to do is resubmit all your paper work but be prepared.

One way I have found to move a short sale is to bite the bullet and get the property appraised. No BPO's a real apprasial and submit that with your offer. It gives the bank a real value. I have found it takes the guess work out of the transaction. It can be risky. If the lender says no you are out the cost of the appraisal. But if you are getting a really good deal what's a grand for an appraisal.

[MBAtarga]

Originally Posted by GWN7

But why is it called a "short sale" if it takes so long?

"short" refers to the fact that the selling price will come up "short" of paying off the mortgage(s) - so the mortgage holder(s) must approve of the sale -with an expectation that is all they will receive.

[look 171]

[QUOTE=ramonesfreak;7290802]This is not quite correct. You as the buyer are responsible for getting your financing secured through a lender. The owner of the Note in default doesnt care about the buyer's qualifications because you either have your financing or you dont. The owner of the Note will receive their cash from whoever you secured your financing at closing.

Many defaulted Notes have certain restrictions placed on the Note by the investor or owner of the Note. For example, there are restrictions limiting short sales to family members, requiring that the property be listed by a real estate agent for 90 days prior to short sale approval etc...

Always ask for proof that the owner/holder of the Note has "approved" a short sale and ask for it in writing. This written document exists and I would ask to see it before I made an offer and wasted my time.

When you see a house listed and it mentions a short sale, that does not always mean that a short sale was approved because as i said above, the seller may be required to list the property for x amount of days before the owner of the Note will even authorize the possibility of doing a short sale.

Obviously most of the precautions and restrictions are to limit sellers committing fraud[/QUOT
It was all cash and no contingency. If they want out why are they fcuking around and lets close the deal. I know about the approval part, but most of those listing agents never return our (agent's) calls. Something is fishy.

[look 171]

Originally Posted by fintstone

I was the first to make an offer on a short sale...full price, cash offer. It was rejected and the home sold to another person for about $100,000 less. Every one of these that I have any personal knowledge of have been a scam in some way...so I am not playing any more. I am only looking at repossessions like Fannie mae or regular sales. It is just not worth the waste of time to me.

I think repos are the same damn thing. Fishy.

[GWN7]

Originally Posted by MBAtarga

"short" refers to the fact that the selling price will come up "short" of paying off the mortgage(s) - so the mortgage holder(s) must approve of the sale -with an expectation that is all they will receive.

Thanks