When Should The Buyer Of A Short Sale Lock In An Interest Rate?

By
Real Estate Agent with Keller Williams Realty Louisville East (502) 664-7827

The problem: An interest rate lock costs the buyer substantial non-refundable upfront money. The money will be lost if the house does not close on time. Yet, short sale timelines are long and unpredictable, to say the least.

What should all parties do in a short sale, as it relates to rate locks?

The listing agent should:  

  • Disclose in writing to the buyer, the buyer’s agent and the buyer’s loan officer that the short sale may take months and there is no guarantee of approval.
  • Disclose in writing if the buyer locks in a rate it is at the buyer’s own monetary risk.
  • Notify the buyer's agent ASAP when the short sale has been approved by the short sale lender. At that time there is a specific "close by" date and the buyer can plan their rate lock with more certainty.

The buyer’s agent should:

  • Disclose in writing to the buyer and the buyer’s loan officer that the short sale may take months and there is no guarantee of approval.
  • Disclose in writing if the buyer locks in a rate it is at the buyer’s own monetary risk.
  • Notify the buyer and the buyer's loan officer ASAP when the short sale has been approved by the short sale lender. At that time there is a specific "close by" date and the buyer can plan their rate lock with more certainty.

The buyer’s loan officer should:

  • Listen carefully to the Realtor’s warnings about the uncertainty of the short sale timelines.
  • Make sure to learn what a short sale is and is not. Contrary to some misunderstanding, a short sale is NOT banked owned and is NOT an REO. It could take months to close or never close at all.
  • Advise the buyer on the risks and rewards of locking in a rate. This varies based on where the interest rates are trending at the moment.

The buyers should:

  • Internalize everything their Realtor and loan originator are advising. There is a risk of losing non-refundable rate lock fees, but there are also opportunities in timing the rate to the closing date.
  • Unfortunately there are many variables and many unknowns, just like many decisions in life.
  • Ultimately, the buyer has to make the decision, based on the best information available at the time.

Good luck to all involved. A short sale benefits the short sale lender, the seller and the buyer.

Typically, the buyer gets a good deal on the price and hopefully they can time a good interest rate, also.

Buyers are encouraged to seek advice from competent legal and mortgage advisors.

In Louisville KY, sellers who are "upside down" on their mortgage and need to sell, should call Dave Halpern at (502) 664-7827.

 

Posted by

 

 

Dave Halpern, Realtor

The Dave Halpern Real Estate Group

Keller Williams Realty Louisville East

Website David.DavidHalpernRealtor.com

(502) 664-7827

 

 

View Dave Halpern's profile on LinkedIndave_halpern twitterhalperndave_facebookDave Halpern QR CodeLouisville Foreclosure Realtors Dave Halpern

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Brent Kluge 06/16/2011 09:06 AM
Topic:
Lending / Financial
Location:
Kentucky Jefferson County Louisville
Groups:
Mortgages
All About Mortgages/Mortgage Networking
Short Sales Specialists
The Ninety-ninth Percentile
Voice of Reason
Tags:
interest rates
realtor
real estate agent
legal
broker
loan officer
reo
bank
timeline
rate lock
foreclosure
originator
mortgage
short sale
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Rainer
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Brent Kluge
Senior Vice President, Secured Funding Corporation - Rockville, MD
I do mortgages REALLY well and I WON'T RIP YOU OFF

GREAT information...   I am going to reblog. Well said.

 

b

Jun 16, 2011 09:05 AM #1
Rainmaker
287,572
Barb Van Stensel
Chicago, IL

As always Dave, more insight into a difficult situation which could lend success in the end.

Jun 16, 2011 10:39 AM #2
Ambassador
2,287,145
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Short sales and locking interest rates for the loan to buy one, are tricky roads to travel.  You've covered the ground better than any blog I've seen on the subject.

Jun 16, 2011 03:46 PM #3
Rainmaker
525,189
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Brent - Thanks for the reblog!

Barb and Judi - Thank you. You are both very gracious. I am just a humble reporter from the front lines of short sale world.

Jun 16, 2011 04:57 PM #4
Rainer
8,159
Sara Chris
Absolute Consultant Group - Toluca Lake, CA

Normally a rate lock is good for 30, 45 or 60 days, though that time period can be shorter or longer; once that period expires, the borrower is no longer guaranteed the locked-in rate unless the lender agrees to extend it. It is better to consult a short sale consultant for better guidance. 

May 11, 2014 06:25 PM #5
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Rainmaker
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Dave Halpern

Louisville Short Sale Expert
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