10 Homebuying Tips for Short Sales

Top 10 Home Buying Tips For Short Sales - Guide to Understanding Short Sale Foreclosure Real Estate
Published on Friday, September 25, 2009, by Todd Foust

Modern homebuyers will inevitably come across one or more properties currently classified as a short sale. A short sale is an attempt by the current owner to sell a home in lieu of the bank taking it back through foreclosure proceedings, thus partially salvaging their credit rating and lifting the burden of heavy mortgage debt.
The entire short sale process hinges on the hope that the bank will take a loss now, approve the sale, and eliminate the costly process of foreclosing, clearing, and reselling a home. Obviously, this is a big hope on behalf of prospective homebuyers as well and they need to understand some things in order to lessen the chance for disappointment of unapproved short sales. This is what they should know:
1) Price is usually set by the agent & seller, not bank - The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.
2) Loans owned by 1 bank usually better than 2 - If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. While the reasons are beyond the scope of this guide, buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. A savvy Realtor can let you know this type of information.
3) Lowball offers get slow or no response - Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.
4) Agent must check comparables before submitting offer - The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.
5) Don't hang your hat on the property - Short sales aren't necessarily "short." It can sometimes be a very long process. Don't get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. In most areas it is completely legal and risk-free to have multiple offers out at any given time with the proper contingencies.
6) Sellers with other properties or too strong of financials may not qualify for short sale and/or may be asked to pay the difference - Sellers that own more than a handful of properties or have an extremely large net worth will probably not be eligible for short sale. In some cases the seller will be asked to pay the difference of the sale. The seller might even need to sign a promissory note stating that they will pay back all or most of the debt. This has virtually no effect on the buyer as long as the seller cooperates.
7) "Approved" prices are quickest - It is important to remember that short sales are not always timely; however, making an offer on an "approved short sale" can be a quicker process. An "approved short sale" has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn't end up buying the property. These types of short sales are some of the most highly desirable.
8) Some banks look at and want strongest buyers, some want strongest offers - The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.
9) Repairs are seldom done, credit is more frequent - If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.
10) When you get approval, must close on time - During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We'd advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don't just assume it will happen.
Conclusion Short sales can be a great opportunity to find your new home at a competitive price. A Short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. We hope that these tips will help you to remain positive and optimistic throughout the process.

Don't miss the 1st-Time Buyer Tax Credit- Expires 11/30/2009

The first-time buyer tax credit is set to expire on November 30, 2009. New buyers in the real estate market can get up to an $8000 credit on their tax bill if they buy a home this year and CLOSE ESCROW by the end of November.
With the longer time frames on loans that means, you better scramble and buy something this week, (less time needed for all-cash buyers). There are a lot of buyers expected to make their offers this week to ensure time to close, but with the Thanksgiving holiday in there, don't wait. Talk with your REALTOR now about this stimulus program to see if you qualify.
www.JenniferListings.com

Daily Real Estate News December 9, 2008

Study Shows Housing Values Have Climbed
News reports have been packed with stories about declining home values, but a recent government report shows that the situation is not nearly so dire as some reports make it sound.Despite big loses in some areas of the country, the majority of markets continue to show growth in home value over the last five years.According to the third-quarter survey released by the Federal Housing Finance Agency, out of 292 metropolitan markets, 273 showed positive net home values in the last five years. Only 19 percent were negative. While home values declined 4 percent on average in the last year, values were up nearly 29 percent over the past five years.According to the Federal Housing Finance Agency, markets that gained the most over the last five years were:
Honolulu: up 78.7 percent
Virginia Beach: 72.6 percent
Flagstaff, Ariz.: 66.5 percent
Bellingham, Wash.: 65.6 percent
Wilmington, N.C.: 62.1 percent
Baltimore: 60.6 percent

Source: The Washington Post Writers Group, Kenneth R. Harney, (12/06/08)

Bottom of the Market Secret

I've got a secret...or at least the national news seems to be hiding it....let me say it here folks....we're at the bottom of the market in Santa Cruz County. Why do I say this you ask....well, we are seeing multiple offers on well-priced homes and that is a major turning point (yes they are still lower priced than they were even a year ago, but that's what happens in a buyer's market). But, you should know the market goes in cycles. Ask anyone that's been around the industry in the last dozen years and they'll tell you, they've seen it with their very own eyes.

Despite the doom and gloom of national media (which IMHO, you can't generalize something like the Real Estate market nationally, especially along the coast of California, because markets are totally different even within one county, but I digress) our office is buzzing around with happy and excited clients- both on the mortgage end AND the sales end.

Let's break this down...the bottom of the market is usually in hindsight... those that happen to buy during that time are considered investor "stars," but I call them lucky with good guidance by a Realtor. This is my job- I follow trends in this industry and I am telling you...don't miss this golden opportunity to buy some California real estate at prices you won't ever likely see again.

The rates for loans have dropped again and are expected to stay that way for the remainder of this year. This alone, is a good idea to buy or refinance. In any case, say you do buy a home in today's market...you'll need to sit on it (or in it) for 2 years because of tax reasons (or at least 12 months as an investor), by the end of 2009 we expect to see the market not only bottom out but slowly climb back on it's way to a sellers market..but by then you won't have the inventory selection you have now. So, even if today's market goes down 1-3% more in price, the difference is very small in your loan payments and you'll be in the market at a phenomenal deal AND you'll be ready for the turnaround when you sell.

SO, yes we're doing the Buyer's Dance right now...because we are at the bottom of the market folks!

Short Sale Vs. Foreclosure on your Credit Report

Did you know?????
Generally speaking: a short sale on your property will ding your credit by about 100 points and a foreclosure will ding your credit by about 200 points. If you can make a short sale work, get a qualified real estate agent involved and work it to help save some points for your credit. Even an attempt at a short sale (selling the property at a lower price than is owed on the loan, with your lender's approval) may help show some efforts in your favor.
But don't wait....as soon as you think there might be a problem, call your lender and see if there can be a "workout" on your loan. They may be able to get you in to a better loan, reduce payments, refinance, tack missed payments on the end of the loan etc. you don't know until you ask, and it's more likely to happen if you talk to them BEFORE you miss a payment.

Shoulda, Coulda, Woulda- Don't Miss the Market

I hear time and time again that my buyers are "looking for a deal" well they are all over the place-- properties for sale may not be "listed" at their ideal price, but that's not to say they can't be negotiated at an incredible bargain...don't miss the market waiting for a perfect house. Buy a fixer or one of these bank-owned REO properties and turn it in to your dream, or at least a great investment that you can hold on to for instant equity in a couple of years.

I see folks getting caught up in short sales for months with no guarantee that they will even get their offer accepted or not get bumped by a better offer...and I fear that they will lose out on these incredible deals because they waited and waited for something else.

The Santa Clara County market is usually a step ahead of the Santa Cruz County market and they are seeing multiple offers in certain price ranges...just like we are, and buyers are missing out. Now that buyers have realized the market is phenomenal and the rates are good, they are coming out and putting out offers and getting outbid...don't miss the market by waiting too long. Now's your chance to get 2004 pricing and better rates, what are you waiting for REALLY?

Work with a Realtor that knows your market and which properties are a great deal, don't get caught up on "list price" because it's a different negotiation for bank-owned vs. short sale/foreclosure vs. none-of-the-above listings...we can help you sift through it, but don't wait if you have the means to make an offer now, because the selection and possibly pricing may not be there.
www.JenniferListings.com

What is a Short Sale?

A short sale is an agreement by the bank or lender that they will take less for a property than what is owed on the mortgage.

What does that mean? When someone is forced to move or relocate due to a job
transfer, for instance, and it is during a “down market” this can help them get on their way to their new location. More often, it is a “pre-foreclosure” move to help save a seller’s credit (it is a bit better than a foreclosure or
bankruptcy on your record but it still has it’s consequences).

The upside...you can often get a great deal on a home or property because it is often listed at “realistic” or slightly below market value.

The downside...the property is usually in “as is” condition and inspections are often out of the buyer’s pocket. And even though it is listed at a low price, it doesn’t mean the bank will accept that price. Afterall, the bank is in the business of making money and doesn’t want to lose anymore on this property than it has to. Another concern is that if your offer DOES get
accepted (which takes about 2 weeks) you are not guaranteed you get the property until it closes (average is 90+ days to close, rather than 30-45 for a non-short sale). You could be pending in escrow and the bank could get a better offer the day before you close, then they can bump you from the first position and sell it to the other folks.

SO, in some cases you are better off negotiating a good price with your Realtor on the home of your dreams rather than the select homes in short sale, foreclosure or bankruptcy. Don’t miss this booming buyers’ market.