Jonathan Osman is a short sale specialist who lives and works in Charlotte NC. I had the pleasure of meeting him at REBarCamp RDU in Raleigh recently. He has written a great article that should be helpful to buyers considering the purchase of a short sale property. I thought my Birmingham AL readers would find it interesting and informative.
Thank you Jonathan for making this available for reblogging!
This week, Kristin Ayers - our group's transaction manager - forwarded me an article that cited a number of reasons why a buyer should avoid purchasing a short sale or pre-foreclosure property. Of the 11 reasons they provided to avoid short sales, 10 were inaccurate. Therefore, as someone who lists and sells a number of short sale properties in the Charlotte Metro area, here are a few tips to aid you when offering on a short sale property.
1. What the Seller Owes Really Doesn't Matter
The article on short sales this week noted that buyers should be concerned with the amount the seller owes when compared to the market value of today. That is false. The reason why a home is listed as a short sale is that the seller owes more than the home is worth. In some neighborhoods, the banks are settling short sale properties for 40-50-60% of the previous purchase price because those sales figures are no longer relevant. As a buyer, you shouldn't focus on that number either but rather the market value of the property today. If a seller had private mortgage insurance, it can occasionally complicate the transaction but with so many mortgage insurers going belly up, their impact is becoming less and less.
2. Your Offer Should Be Within 10% of Market Value
No the banks are not giving these homes away but neither are they giving away bank-owned homes. Short sale offers within 10% of the fair market value of the property are accepted 9 out of 10 times. Some buyers prefer to low-ball the bank because they do not understand the bank's valuation process. However, low-ball offers are typically countered to by the bank at full market value. Therefore, a buyer who is not willing to pay 10% of fair market value should step aside.
So who determines what fair market value is: a local real estate agent or an appraiser. Depending on the price of the home, the values may be set by a local real estate professional (often not the listing agent) after the contract between buyer and seller. Often times, the agent who set's the price for the bank will be the one to list the property for sale should the short sale fail and the home ends up in foreclosure. As a result, they want a low-priced listing they can sell and routinely price the home low for the market. Also, bank owned homes are priced in the same manner (usually it's the short sale price) with the banks accepting within a percentage of the listed price.
3. Ask Questions of the Listing Agent
Ask 10 agents the way a short sale should be handled and you'll get 10 answers. Therefore, ask your agent to quiz the listing agent as to how many offers the property has, how your offer will be treated by the bank, where the seller is the short sale process, if a title search was done to reveal additional liens, etc. Our group handles short sales in this manner:
1. When an offer comes in from a buyer, it is negotiated between buyer and seller then signed by the seller creating a binding contract.
2. All other offers after the time of contract are accepted as backup-contracts only.
3. If the bank asks for all offers, we respond that we have 1 contract and x backup offers. We take a counter, if any, to the primary buyer and negotiate the sale with them. If they fail to consummate the transaction, we move to the next buyer with a backup contract. If we do not have a backup contract, the property is relisted for sale.
4. Once we have all parties in agreement, the buyer moves to closing.
4. Do Not Ask for Repairs to be Made
Short sales, like bank-owned properties, are sold in 'AS-IS' condition. Let's face it: the sellers are broke! If they hired someone to make the repairs, chances are they won't have the funds to pay them. We recommend that buyers to perform their home inspections even though the property is being sold 'AS-IS' because there are usually a host of latent issues that need to be resolved. Proactive buyers should consider performing their inspections pre-contract and use any repair work as leverage in their negotiations. For example, if the home has a bad roof, price the home with a bad roof, make your offer with the idea that you will need to replace that roof, and let the listing agent know the roof is bad. Word will travel and it will work in your favor to encourage a lower price.
5. No Contingencies and Be Prepared to Wait
Unfortunately, there's nothing short about a short sale. The banks are under staffed to meet the needs of sellers and think that with a 10+% unemployment rate, how many sellers are requesting assistance? Therefore, you need to be patient. That also means that you should not even think about asking for a contingency on the sale of your current home. Once the bank approves the short sale, you must close within 30-45 days. As a result, you must be flexible - preferably living with friends, family, or in a month-to-month rental - in order to consider a short sale. However, bank-owned homes are the same way so what's the big deal?
Never say no to a short sale in spite of what your agent may tell you. You're getting a great home for a great deal but like all good things, they take some time. The banks are getting easier to work with and routinely, the banks are paying real estate agents their full commissions so it's a win-win. In fact this entire year, we only had 1 short sale that did not pay well and it was one where we represented the buyer and the listing agent was very inexperienced. Even in that scenario, we were able to close the home in less than 60 days. By all means, do not expect that every short sale will work out and unfortunately, those are the ones you hear about most.
Today I attended the funeral of a gentleman who spent a career in music serving schools, universities and churches throughout the country as a choral director. The service was a celebration of his life and the music that he loved and shared with so many people. The music I heard today was some of the most beautiful I have heard performed in quite a while.......it blew me away!
I have been looking for videos on YouTube in hopes of finding some of the music I heard. I found this version of Maurice Durufle's 'Ubi Caritas'.......a different setting than what I heard today, but this is the version that I have sung with my choir and I have always found it soothing to my soul. I hope you enjoy it too.
Beaujolais is a delicious red wine made from Gamay grapes that is produced in the Beaujolais region of France. French law does not allow for the wine to be released prior to the third Thursday in November, so when the clocks strike midnight on that day over a million cases are shipped to Paris where they are then distributed worldwide.
City Vineyard Gift Baskets & Winein Birmingham AL will be taking orders and if you would like to receive this 15% discount on a case you must let them know by Friday, November 13th. Please call for pricing and remember this applies to purchases of cases only and they do require prepayment.
Photos taken by Ann Allen, and may not be reproduced without express written permission of Ann Allen, Keller Williams Realty, Hoover AL.Please check if Creative Commons License as been granted for this or other photography provided by Ann Allen.Permission usually granted if credit is given with a link back.Thank you for your understanding.
Buying a Birmingham home.....Don't get sued for Breach of Contract!
One of my Realtor® buddies shared this story today.....
He has an investor client that he has worked with several times. About six months ago this client found a property he was interested in and chose to make an offer without consulting the advice of his Realtor®.
The property was listed for $250,000 and he offered $150,000 for it. The seller accepted his offer, but the property appraised for only $141,000. At that point the buyer refused to go forward with the purchase. He had not made the contract contingent on financing or inspection. The seller sued him for breach of contract. This past Friday was court day. The buyer owes $17,000 in attorney fees and was ordered to pay the seller $19,000.
What is worse, being out $36,000 and having no property to show for it, or owning a property that you paid $9,000 more than it appraised for? And could working with his Realtor® have prevented this fiasco altogether?
Lesson learned the hard way. OUCH!
Be careful........a contract is a legally binding document and even someone experienced in purchasing properties may not protect their interests adequately. If you are a buyer, the commission your Realtor® earns is almost always paid by the seller. Don't take chances......get the professional help that is available at no cost to you!
Georgia has been found and reunited with her familyl!
You may remember that some friends of ours have been searching for their missing dog. She was found today and now she is finally home after 3 long weeks! Georgia and her brother, Vincent, escaped from their fenced backyard on October 15th. Vincent was found after just a couple of days and has been missing her terribly. These two have never been separated before now. Georgia has lost a lot of weight during her ordeal, but she is not hurt and will be fine. Can you imagine how happy these dogs are to be together again? Not to mention how happy their humans are to have them both home safe and sound!
We had a great time at REBarCamp RDU! Thanks to everyone who worked so hard to put this event together and help make it a success. I absorbed so much information in a short time my head is about to burst, but in a good way! It was so much fun getting to meet so many people in person for the first time. Here are just a few photos of some of the gang in attendance......
Patty and Thom
Wordy C and Jeremy
Carol
Debe
Sarah, Daniel, Jeremy and Lori playing Lynchburg Squares
I'm on my way! I'm sitting in the airport in Orlando where I'll be catching my connecting flight to Raleigh in a few minutes. This is my first road trip in too long and I'm very excited about it!
It looks like I'm going to have time to relax and get settled in my room before heading to Beer for Bloggers this evening. Tomorrow will be a full day, I forget how many sessions there will be......for that matter I really don't know what Bar Camp is. I bet I know by the time I return home full of information.
I don't go anywhere without my camera anymore. I never know when I will have an opportunity to capture a unique photo.......like this one.........
Last Sunday afternoon I was on my way home and came upon an unusual site in my neighborhood. I was driving on Bearden Road, having just crested the hill by Pelham High School on the way to my house, and was surprised to see this colorful hot air balloon floating above a grassy lot by Shelby Baptist Church.
I pulled in to get a close up shot and watched as the balloon rose and lowered again. From what I could tell the balloon wasn't flying any further than up and down. I don't know what the event was, but they looked like they were having a lot of fun! I'm glad I didn't miss the chance to get a photo!
Photo taken by Ann Allen, and may not be reproduced without express written permission of Ann Allen, Keller Williams Realty, Hoover AL.Please check if Creative Commons License as been granted for this or other photography provided by Ann Allen.Permission usually granted if credit is given with a link back.Thank you for your understanding.
Leonardo's Italian Restaurant in Vestavia will always be one of my favorite places to dine in the Birminghamarea. Mike and I had our wedding reception there almost eight years ago. We had a morning wedding and then everybody went to Leonardo's for lunch. It was wonderful!
A cozy little place that serves lunch and dinner, offers a full bar with live music nightly, Leonardo'sis a real treat!
Our anniversary will be Tuesday, but we decided to celebrate with dinner at Leonardo's a few days early. I am so glad we did because we got to join in the fun as the restaurant and staff celebrated Halloween.
Soft piano music played by Mario added to the romantic (and a little bit spooky) atmosphere of the evening. We were amazed they he could play with those gloves on!
There were some other characters running around too......we spottedElvis, who was one of the servers.
There are so many choices on the menu and I had my usual hard time making a decision.. I finally settled on Lasagna and Mike chose Veal Saltenboca, which he always enjoys. My portion was huge, but so good I could have eaten every bite. We finished by sharing the Tiramisu. Yummy!
When you visit Leonardo's, be sure to try the rolls. They are to die for! Don't fill up on them though (they will keep bringing them), you will want to save plenty of room for your meal.
It's almost time to put on your costume and greet the trick or treaters, or go to a party, or whatever you like to do to celebrate Halloween.
Have fun, be careful, and don't eat so much candy you give yourself a tummy ache.
Don't forget before you go to bed to turn all your clocks and watches back one hour. We are coming off Daylight Savings Time and get an extra hour of sleep tonight.
Now is also a good time to change the batteries in your smoke detectors.....and change them again in the Spring when we revert back to Daylight Savings Time.
I write about people, places, things to do and anything else that inspires me, including articles related to finance and the Birmingham area real estate market.
DISCLAIMER: Ann Allen disclaims liability for any damages or losses, direct or indirect that may result from use of or reliance on, information contained in her blogs or for accuracy of comments or opinions of visitors to her blogs.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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