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Great Short-Sale Key Points

By
Real Estate Agent with WC & AN Miller Realtors (A Long & Foster Co)

Hi Everyone,

Please, take a look at this great short-sale information. This was an original post by Wanda Phillips in Fl. There are 12 keys points. If you are considering purchasing a short-sale these are such great tips. 

1. There are usually no guarantees from the lender (or the seller) with short sales. Be prepared to be flexible.

2. The employees of the lender that are negotiating the sale are not there for the benefit of the buyer or the seller. Their only goal is to collect as much money possible for the lender. The lender may:
• Misrepresent their own policies or use other means to pressure the parties involved into paying more money.
• Require the seller to sign a note or new loan for the balance of the mortgage due.
• Change their price and terms up until the moment of closing.
• Pursue a judgment against the seller for the amount of the shortfall.
• Investigate the seller for indications of mortgage fraud if there are unexplainable gaps or discrepancies in the seller's current financial situation and what he claimed at the time the loan was granted.
• Expect the home to initially be listed at or close to market value and then dropped accordingly until viable offers are received.
• Require their own broker's price opinion or appraisal.
• Require the property be sold "as is".
• Require that the seller and the property qualify for a short sale.
• Require an offer be made before they will consider discussing a short sale.
• Give an "approval" letter that is just a thinly disguised "maybe".
• Set caps on payments to Realtors, title companies.
• Set restrictions for amounts paid to investors negotiating assignments or simultaneous closings.
• Set restrictions on issuing clear title.

3. The seller does not have to be in foreclosure or even behind on payments to ask for a short sale - the seller must prove that his house can't be sold for what he owes.

4. The term "short sale" or "foreclosure" does not automatically mean "under market value".

5. The time frame involved in a short sale varies from lender to lender, however, in general, it can take two weeks to 60 days just to receive an approval from the lender to consider a short sale.

6. The parties involved in the short sale will need to contact the lender's loss mitigation department to get basic procedure information such as:
• What is the process to qualify the seller and property for a short sale?
• Whom do you submit a contract to?
• What is the estimated time frame for acceptance of a contract?
• Will the lender confirm in writing that they will accept a short sale?

7. Sellers should always disclose the financial status and lender position to potential buyers upfront.

8. Sellers should always include an addendum to the sales contract stating that the sale is contingent upon approval of a reduced loan payoff by a third party - the Seller's lender.

9. Sellers should not sign a quit-claim deed subject to the mortgage. Sellers will still be liable for the mortgage payments. 

10. The shortfall could be taxed as income to the seller. For example, if a seller is in a 30 percent tax bracket and has a $30,000 shortfall - they could end up owing an extra $9,000 in taxes.

11. In most cases, to make a short sale worthwhile for a buyer, the property should be priced substantially lower than comparable (easier to purchase) properties.

12. Tips for Buyers: 
Ask for verification that the Seller's lender has already agreed to a short sale.
• Get the terms required for the short sale.
• You can get some information about the mortgages and any other liens on the property.
• Verify the status of the seller's payments and where they are in the foreclosure process.  
• Lenders are getting better at working with short sales but regardless - Understand there is no guarantee that the sale will close or that the price, terms and cash required will not change prior to closing.
• Protect earnest money deposit until the lender approves the short sale. 
• Specify in your contract that the buyer will be permitted at their option to cancel with full refund of deposit if the sale is not approved in writing by a specific date.
• Specify in your contract that the buyer will be permitted at their option to cancel with full refund of deposit if the sale does not close by a specific date.
• It is especially important to stay in touch with all parties involved including the seller, listing agent and settlement agent, and if possible, the lender.
• All buyers should be pre-approved for a mortgage before submitting the offer.
• Wait on having a home inspection and an appraisal for the loan until after the lender has accepted the short sale proposition.

Please, let me know if you have any questions,

Adriana Steel

240-793-1791

adriana@LNF.com

www.adrianasteel.lnfre.com

www.washingtondchomesblog.com

Comments (1)

Darrin Friedman
Berkshire Hathaway HomeServices The Preferred Realty - Allegheny, PA

Adriana: great info.  Keep up your blogging!  You would be amazed at how things can come from it.

Jun 05, 2009 03:23 AM