Buing a short sale property?

In My Humble Opinion
1

Who’s done it? Anybody have tips on securing the deal?

I found a house I really like, but I’m worried it’ll get sniped by someone else. I’m told I can make an offer to the bank. The Realtor I’m using said bid low. BUT, what if I do that and someone else bids more then I do, and by the time I find out it’s too late? How do I find that middle ground to get what I want? Also, how do I get a quick response from the owning bank? My Realtor also said it takes a while to hear back from the bank. Screw that, I want to know THAT DAY.

I hate trying to buy a house, it’s so goddamn discouraging. And of course, all the ones I’m interested in a foreclosed or short sales. Meaning, just a big pain in the ass.

With a non-short or foreclosure, you can just base your offers on comps. But this bidding and offer stuff for short sales kinda blows.

2

Here is an article which talks about the perils of buying a short sale property. My mother in law is trying to buy a short sale house and it seems like it takes forever to get bank approval. I think she is going to give up on the property because the bank isn’t responding.

I should note that the article is VA specific and the situation in Chicago may be very different.

3

Short sales, from everything I’ve heard, can really be murder – takes forever to get approval from the bank(s) and in the interim period between the negotiations and sale, because the owner often has still has access and little to lose, you may find yourself with a house stripped of landscaping and appliances. I’d wait for it to go back to the bank (REO) and just buy it like you would any other listing.

Hint: if you join one of those “realtytrak” foreclosure sites (there’s a week free trial) you can find out the amount of the mortgages and other liens on the property and make your offer accordingly. There are probably other ways to find this information out if you do some research. Good luck!

4

Whose bank?

I understand why the seller’s bank might take forever, but why would it take her bank months to approve it?

Or another way. . .why would it take them longer to approve it over any other sale? They either are satisfied with the appraisal, or they’re not, but that shouldn’t make a difference whether it’s a short sale or not?

5

The seller’s various banks.

Trunk, from what I understand, they have scads of these things to deal with and not enough manpower. Also, mortgage holder #1 might think the offer is okay, but mortgage holder #2 (who’s probably going to be screwed by the whole deal) might drag their feet, want to renegotiate or throw a monkeywrench into the whole thing.

6

Short sales have nothing to do with the time it takes to buy a house. They are called short sales because the home is being sold, usually, for less than what is owed on the property.

Buying a short sale property has definitely been a lesson in patience for me. I am like you I WANNA KNOW NOW!!!

Low-balling an offer is a good strategy, but make it reasonably low-ball. If the property is offered at 300K and it has 400K owed on it, an offer of 200K will probably be laughed off and not even responded to. An offer of 275K, might get their attention. The banks are losing their asses and want to recoup as much as possible.

Get with your realtor, find out what is owed on the property (Info is available from the County Assessor or can be found in a title search for the property). You like the house, decide what you are willing to pay for the property and make an offer. Some of the banks do not counter. They get offers for the properyand take the best one. Your realtor should have really good communication with the realtor representing the property. Have him/her call the sellers realtor and ask what kind of turn around you can get on an offer and write that up in your contract. If they say 7 days, allow for 7 business days.

We started back On January 8 with an offer on a house that was short sale. The bank decided after a month and a half. The bank backed out of the sale- offering a 1 yr fixed APR to the homeowners. We had to go back to square one.

The banks are tricky bastards. Get everything in writing.

We also found that, here in Las Vegas, the banks usually want a sizable earnest money deposit, ours was $5000, and a mortgage pre-approval certificate. YMMV there, though.

They are a pain in the ass. We just opened escrow yesterday on a hose that was a(nother) short sale (the house was empty). I think in the foreclosure thread I mis-stated that it was a foreclosure. Anyway. We put the initial offer on the house on February 25. We got bank approval on April 4. That was after we agreed to pay $2000 (cash at close) toward paying off the 2nd mortgage to release the lein on the 2nd. And gave an offer of full asking price of 310K. with no contingencies and 20% cash down. The County Assessors here lists the last purchase price at 424K. I have no idea if they had any sort of equity loan on top of that.

We found out that there was someone else who had put an offer on the house back at the end of November, then we came along and beat their offer. (They offered less and wanted help with closing costs). I feel kind of bad for them, but hey, what can you do.

I hope that made sense as it is long and apparently rambling.

7

Researching the market is likely to be a better plan than basing an offer on what’s asked or owed. Things will vary a LOT from one place to another.

Right. But most of them also understand that qualified buyers are thin on the ground, and so probably willing to consider even lowball offers seriously.

8

Here’s another article about short sales, from a national perspective.

Disclosure: I know the writer.

9

I’m in the middle of this now, and can attest to the fact that it takes a long, long time. I put my initial offer in back in early January, and I’m still waiting for Bank No. 2 to say yes. I was told by my realtor that getting Bank No. 1 to agree was the big hurdle, but they agreed a month ago, and I’m still waiting on Bank No. 2. Bank No. 2 has less skin in the game, but I’m not sure that matters. It’s all about Banks 1 and 2 agreeing on sharing the spoils, and until they do that, I’m in nowheresville.

It’s a hassle particularly because in order to write the P&S and get a mortgage yourself, you kind of have to commit to particular dates. I suppose it could be said that you shouldn’t sign a P&S or pay for any of your mortgage bank’s costs (appraisal, title fees) until you have a firm commitment from the lienholders, but in practice, it seems to me, you have to show that you’re a valid buyer so the lienholders will take your offer seriously. To make a long story short, if my deal gets scuppered, I’m out maybe $1,500.

As to your offer, my attitude is to make it competitive, and not try to lowball excessively. You’re trying to convince one or more skeptical lienholders that you’re an earnest buyer, and not some bottom-feeder. And, as you say, you could be outbid. The market is not that bad, after all.

10

The mortgage holder’s bank. She has the cash for this transaction.

11

I went through the pain of buying a short-sale house about three years ago. It might not have been as serious a short-sale as some of the others discussed above, but since you’re looking for information…

I was shopping around for a house, and the realtor I was using showed me this one. I really liked the layout and the neighborhood, and the price was in the range of what I was looking for (~180-220k). I decided to put in an offer of 200k, and it got accepted.

Then the pain started. The couple who owned the house was apparently in a bad spot. They had bought the house about 9 months previously. It was never explicitly said (since I think it’d be technically illegal), but from what tidbits of information were mentioned in passing, I’m guessing they did a “no money down, all costs rolled into the mortgage” deal. So they were starting out in the hole, and hadn’t had much time to work the principle down. Then they got pregnant, and he lost his job. They had missed 3-5 months of payments, so nothing going to the bank, plus late fees etc continuing to bump up the loan amount. I’m guessing they just wanted out.

They accepted my offer (and $2000 earnest money) at the end of April. Final closing wasn’t until early July. So there was roughly 2 months of checking with the realtors trying to find out if the mortgage holder was willing to sell or they’d just foreclose.

Things were a little panicy for me during the last month. I had been living in an apartment, and had not renewed my lease (ending in May), and told the complex I wanted to go month-to-month after that. A few weeks later (early June), I got a “yes, they’re going to go through with the sale” call, and told the apartment complex that I’ll be moving out at the end of June. Then a week or so later I got another “no, they’re still running numbers” call, and I rushed back to the management office to let them know I still needed a place to live. Unfortunately, in that time they had accepted a new tenant in my apartment starting July 20th or so. They were willing to let me stay until about the 18th (since they needed time to do the outgoing inspection, steam carpets, repaint, etc), but after that I needed to be gone.

Needless to say, with that kind of a deadline, I was praying for a quick resolution on the sale. It got to the point where I was looking around for storage options and friends to crash with if it ended up I’d have to move out of my apartment before being able to move into the house.

Fortunately, one more call set the closing date for the first week of July. I went in, signed a bunch of paperwork, gave them the certified check for the down payment / closing costs, and had a house to move into with a week or so to spare. :slight_smile:

After all that, I’d say that an offer on a house should take into account market price, comps, etc regardless of whether it’s a short sell or not. The owner may want to get out of a short-sale situation with whatever they can get, but their bank is going to be comparing your offer to the current mortgage, and would probably be more likely to go along with the sale if they’re losses are minimized.

12

I’m in the middle of trying to buy a short sale property right now as well. If you want some idea of how much fun this has been, get a bowling ball and drop it on your own foot from a height of about four feet. There, that oughta give you an idea. :stuck_out_tongue:

Offer was made the third week in January, and only just now am I starting to see any signs of movement. If I didn’t absolutely love this house, I wouldn’t be doing this. Truth is, only about 20% of short sale offers are successful, if industry statistics are to be believed (sorry, no cite…I work in the title industry, and this is information given at one of my classes).

A lot of the problem is that there are just SO MANY foreclosures and short sales going on right now that the banks can’t keep up. The other part of the problem is that banks have recently taken such large losses, they are trying to stem the bleeding as best they can. Before they will approve the deal, they conduct their own appraisals, and if they think it’s better for them to foreclose and re-sell they will…and then pursue the previous owners for a deficiency judgment to try and get even more of their money back.

Best of luck with yours…I can truly say I understand how you must feel!