Lehigh Valley Short Sales - Making an Offer on a Short Sale - What Questions to Ask???

Lehigh Valley Short Sales - Making an Offer on a Short Sale - What Questions to Ask??? - As a Home Buyer and a Buyer Agent there are certain questions you should ask - A Few Important Tips shared here.

What is a Short Sale: A Short Sale is when a homeowner owes more on their Mortgage for their home then their home is currently worth at current market value.  The homeowner is trying to avoid Foreclosure by selling their home as a short sale. 

What the Consumer/Buyer should know about Short Sales

1) The number 1 most important part to thinking about buying a short sale is you need to be working with a Real Estate Agent who has experience negotiating and closing short sales...this way they know what questions to ask the Listing/Seller's agent to make sure the short sale is being processed correctly. 80% of the Real Estate Agents who list short sales have no idea what they are doing....most have never even closed on a short sale. You do not want to work with Agents who have no experience in successfully closing short sales.  It is a waste of time.

2) The most important way to decide if you want to make an offer on a short sale is if you are in a position where the type of home you are looking for is hard to find....meaning there are no other homes available on the market that are either Typical owner occupied sales or Foreclosures....because right now, We are in a Buyer's Market...so, as you know there is a large inventory of many types of homes.....if you can find a home that is not a short sale....then you may want to forgo the stress of making an offer on  a Short Sale.

3) Short Sales are most perfect for people who are in a current month to month renting situation or living with family...they are in no rush and have the time to wait around about 60 to 90 days just to get a reply to their offer from the seller's Bank.  Then close within 30 days later...Typically, the entire process is about 4 months until settlement.  If the short sale is processed correctly by the seller's agent or the third party negotiation company.

4) Short Sales will not take a home sale condition - So, if you need to sell your home....forget looking at short sales.

Questions you need to ask the Listing Agent - As a Consumer & Buyer Agent

1) You need to make sure that the Listing Agent has pulled a title report to verify what liens & judgments are against the seller.  Just because the seller said they only have 1 lien does not mean they only have 1 lien. THIS MUST BE VERIFIED.

2) You need to make sure that the seller is current and up to date with their water/sewer/trash bills through the local municipality and all taxes are also paid up to date IF THEIR TAXES ARE NOT INCLUDED IN THE LOAN PAYMENT.  Just ask the Listing Agent - If it has not been verified....again the title company can do this.  There are Banks who will NOT pay these defaults. FHA will not pay water/sewer/trash bills...the seller MUST keep these current.

3) How many Lien's are on the property and who is the Mortgage Company - What type of loan ie: FHA, Conventional etc. ?? If it is an FHA loan....that is a good thing as FHA will tell the seller exactly what they will accept for the property after the appraisal has been completed - it is 80% of the current market value to start...so this way the process is much easier and more likely to get a reply from the seller's bank faster.  Plus, you as a buyer know what you will be expected to pay for the home.  The Bank expects current market value or just a hair under.  Remember,  The seller already owes OVER CURRENT MARKET VALUE and the Bank is already loosing money at current market value.

4) If there are 2 Liens/Mortgages on the property - You must ask the Listing Agent if they have also started the short sale process with the 2nd Lien? This must be done at the same time....it is not uncommon for the 1st Lien holder to NOT pay the 2nd Lien off in full....the process for the 2nd Lien holder takes just as long as the first Lien holder and why this should be done at the same time.

5) If there is a Third Party negotiation company - This means that the listing agent is not handling the short sale.  You need to know who the negotiation company is and how they are going to process the short sale etc.  You should request weekly followup and communication. If there is a negotiation company - You the buyer will be paying for this service...NOT THAT I AGREE WITH THIS.  But, if the home is your dream home, 1% of the purchase price may be worth it.  You may also be charged 2% transfer tax instead of 1% as part of your closing costs.

6) If you need seller's assist - because you do not have all the money you need for the closing costs.  It is standard practice that Banks will only give a total of 3% seller's assist.  So, if you need 6% - don't even try.  The seller's Bank will most likely not give you 6% no matter what.  This is also True with Foreclosures....they will normally only approve 3% also - except Fannie Mae Foreclosures...they will give you 3.5%.

Well...that is pretty much the most important points to keep in mind. Weekly followup with the Listing Agent on how the short sale process is moving along is really important.

A good practice for your Buyer agent would be to investigate the listing agent by pulling their listing history to see if they have closed any short sales over the past 1 to 2 years....then you know what you are dealing with.

Listen the worst thing that can happen is you wait around for 60 days min and you do not get a reply from the seller's bank...at that point you will have the right to continue to wait by extending the time you are going to give to them in writing or just get out of the contract and get your deposit money back.

The worst part of making an offer on a short sale...is not knowing what is going on and not being able to make an

GOOD LUCK!  I hope this has helped you. offer on another home at the same time.