Real Estate Blog - Short Sales In Branford Connecticut and New Haven County Part 5- Short Sale Myths and Truths About Offers

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Short Sales In Branford Connecticut and New Haven County Part 5- Short Sale Myths and Truths About Offers

Short Sales in Branford Connecticut and New Haven County - This is a series of articles for buyers and sellers to better understand what a short sale is and how to decide what to offer on a short sale, myths and truths about offer prices on short sales.

Here are the links to the Short Sales In Branford Connecticut and New Haven County Series:

An Alternative to Foreclosure

Do you qualify to do a short sale in New Haven County Connecticut?

What you need to have in your Short Sale Package.

The process of the Short Sale; what happens next.

There is quite a bit of misinformation about how much you can buy a short sale for. There are those that are watching late night TV shows about buying real estate at 50 cents on the dollar and with no money down.

MYTH #1- The lenders are so desperate they will accept any low offer that is offered on a short sale.

TRUTH- The lenders would rather work out solution that is workable with the homeowner. Most use a formula to determine their loss and what the actual net proceeds they will accept at a short sale closing.

MYTH #2- The lenders are just waiting to get your low ball offer!

TRUTH- Lenders have a policy to follow. The policy is that the listing agent submits the short sale package from the seller along with the buyer’s short sale offer and package. The lender will then order a BPO The BPO is not an appraisal. It is a Broker’s Price Opinion. The BPO usually comes back in 7 to 10 days. The lender pays for the services of an agent to go out and do this Broker's price opinion.

The value that the agent gives to the lender in this BPO will be the amount they begin negotiation with. Once the BPO is returned they work their formula and send us a statement telling us what they will need to net. The lender usually will accept about 5% to 15% below the BPO for an accepted offer.

MYTH #3- You can offer 30 cents to 50 cents on the dollar of what the listed price is.

TRUTH- The lender will take a small discount off of the value of the BPO usually right below market value.

The starting point in the negotiations on a short sale offer is not the list price. You must check to see how much the owner owes to the lender by pulling up the tax rolls. If a Lis Pendens has been filed and the house is in pre foreclosure you will also have to take into consideration that there are other bills they most likely have not paid for that affect the sale of the property.

Those are:

Second mortgages or home equity lines of credit

Unpaid Property Taxes

Unpaid HOA fees

Title insurance

Real Estate Agents' fees

Related attorney's collection fees

All of these fees will have to be paid at the closing. Most likely the seller is not going to have all that money to bring to the table at closing. These figures are submitted to the lender because the lender will choose which closing fees they will approve and how much they will consider these fees to be reduced.

Once you determine how much the seller owes on their property you will have some idea as to how to structure your offer.

You must look at what is owed to the bank versus what the market value is; the list price. The lender is actually reducing the loan down to the market value which can be a reduction of up to 50% as many markets have dropped that much in the last couple of years.

When making an offer on a short sale you must have a lot of patience. If you have a specific time frame that you need to be in a house in the near future trying to buy a short sale that is at the very beginning of the process and a BPO has not yet been done on the property then most likely would not be in your best interests to pursue the offer.

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Contact Donna Bigda, ABR, SRES, e-PRO, Realtor®, RE/MAX Alliance Licensed Realtor® in the State of Connecticut at 203-488-1641, ext. 214 to list your property for sale or to purchase a property in Branford, Guilford, Madison, East Haven, New Haven and the rest of shoreline area in New Haven County Connecticut.

If you're thinking about buying a home in Branford CT there are plenty of great buys in today's market and now is one of the best times to buy while interest rates remain low. For more information on Branford CT real estate homes or condos, see Branford CT real estate or sign up today to get access the hottest new listings here Branford CT homes and condos.

To keep up to date on the current state of the Branford CT Real Estate Market & other information about Branford CT, subscribe to my blog via email here or visit online at www.connecticutshorelineblog.com.

If email is your communication preference, email me at donna@donnabigda.com.

Disclaimer: All information provided by this author is strictly an opinion, is not guaranteed, may be based on information collected from several sources, which may or may not be deemed reliable at the time of researching this article and may be time sensitive.

P.S. If you are listing your home as a short sale in New Haven County Connecticut make sure you hire an agent who knows how to do short sales, can give you the expertise to help relieve the uncertainty and most of all, help your family. Call me at 203-488-1641, ext. 214 and let’s get started on the path to recovery.

Posted by Donna Bigda, REALTOR®, CDPE, e-PRO Branford Connecticut Homes and Condos on 01/24/2009 03:41 PM

Comments (6)

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Originally posted at: Southern Connecticut Real Estate: Short Sales In Branford Connecticut and New Haven County Part 5- Short Sale Myths and Truths About Offers

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6 Comments on Short Sales In Branford Connecticut and New Haven County Part 5- Short Sale Myths and Truths About Offers

JAN

These take so much patience from all parties to the transaction.

Heath - They certainly do take a lot of patience for everyone involved and it's so important to educate both the buyer and the seller on the entire process.

JAN

Senior (61+) howners who have equity in their home should contact a Reverse Mortgage Specialist to see if an RM loan can make a in process or pending foreclosure action go away. Even w/ an existing mortgage, an RM will pay that off and there are no monthly installment loan payments established. Your initial telephone call will take about 5-7 minutes to discover if you are a good reverse mortgage canidate. The rumors that you do not own your home, when the money runs out they kick you out, and that you can not live in your home as long as you want are all NOT TRUE. (From John of jkaravas.com)

FEB

Donna, thank you for the very useful series of posts on short sales. As an attorney, I would hope that you address legal protections for both parties in the contract of sale. I think these would include making seller's sale obligations contingent upon satisfactory lender approval of the sale as well as making buyer's obligations contingent upon that approval, plus putting a time limit on that approval so that the buyer can back out if it takes too long. I have seen contracts that do not have a closing date but simply say something like within 15 days of lender's approval. Technically this means the contract is binding on the buyer until the sale is approved (or rejected) when it would be clearly in the buyer's interest to have a date certain that then can be extended by agreement of the parties if the approval seems to be progressing. Another important point is that the seller is interested in not only getting the sale approved but in making sure that the lender forgives the remaining loan balance (or at least the great bulk of it). Lenders have the right to seek deficiency judgments in Connecticut after a foreclosure (which is not the case in all states) so when a lender approves a short sale and it waives the remaining balance this is a foregiveness of debt that the lender might not have forgiven if the lender pursued the foreclosure. Also on houses that are not principal residence or that have debt that was not used to acquire or improve the home there is the old problem of forgiveness of debt resulting in imputed income to the borrower. Link to IRS information this is a complicated area in which the borrower should be advised by a tax professional.

My Website I have a blog post there on short sales also which may be interesting reading. Thanks!

John - Thank you for that information about the option available with a Reverse Mortgage.

Paul - Thank you for all of the great information you have provided which is of a great benefit to both buyers and sellers regarding short sales. It was wonderful to talk to you today too!

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