I’ve been looking for a house for about a month, and have a pretty good idea of what is available in my price range. I was very surprised to check the real estate website yesterday and find this particular house. It’s far newer and with more amenities than anything I’ve seen, as well as in a great location. I asked to see it right away with the plan of making an immediate offer.
However, the realtor let me know when I arrived for the showing that it was a short sale, and because of this, the offer will take 8 to 10 weeks to approve! The bank is taking a loss on it, so they have to approve it. Now, my lease ends on March 1, so this is uncomfortably close, not to mention the fact that I wouldn’t know if I got it. However, she explained that we could make an offer and keep looking, then withdraw the offer if we want to.
For reference, the house is on the market for 5k under appraisal (pretty standard in this economy and based on the house’s condition) but it sold for 9k over appraisal only four years ago. It was on the market FSBO earlier this year and did not sell at about 20k over appraisal. I’m planning to offer about 4 or 5k less than asking price. The house’s condition is superficially kind of bad - needs major paint touch up, grout, probably new carpet in a few rooms - but is about 50 years newer than anything else in my price range, and definitely the most structurally sound and likely to increase in value. However, my sister’s boyfriend just bought the house across the street a few weeks ago, with a similar floor plan, for about 13k more than their current asking price (in better condition, however).
Has anyone tried something like this? What are your experiences? How is it to deal with making an offer to a bank rather than an individual homeowner? What can I expect? Is it really so easy to walk away from the offer as my realtor describes? I’m really hopeful to get this home, but it seems almost too good to be true. I’m a first time homebuyer so I could conceivably work it out with finding a new place to rent temporarily if I don’t get it and don’t find any other house.
Real Estate Person checking in. Yes, my office has done short sales and they are a time consuming pain in the ass.
It is going to take a very long time. The seller is going to have to document everything, so the bank makes sure they are not walking away with an extra nickel in their pocket! All the buyer can do is be prepared to get a mortgage, then sit and wait.
Saying a house sold for any amount “only” four years ago is meaningless. You cannot go back more than a year for comparable sales; and, in today’s market, we don’t like going back more than six months.
The seller is going to have to document income and get a HUD–the document drawn up by the attorney stating where the money is coming from and how it is being paid out. At any point the bank can demand more documentation and make a counteroffer, meaning everything has to be documented again. And like all institutions, they take forever to give you a response.
Not a real estate person here, but I’ve got a question. Is there a possibility the seller could have already waded through some of the paperwork, making things a little quicker when an offer comes in?
The reason I ask is that my husband’s friend is attempting to sell his house via short sale right now. There is no offer on the house currently, but he claims that he’s got approval from his bank that if any offer at or above $X comes in, that he can do the short sale. On the other hand, my husband’s friend is an idiot and I take whatever he says with a tablespoon of salt.
I can only speak for New Jersey, but we don’t do the paperwork until after the offer is made. If the house sits on the market for six months and the guy now owes more in late fees, the bank has to get a higher price or agree to forgive the entire debt. It depends on what the debt is and how much of a loss they are taking.
Furthermore, the comparable sales would be trickier, particularly with sales prices going down. If he gets approval for an offer of $150K now and in six months when he gets an offer of $155K but comps are now at $135K, it’s not going to work.
I’ll second that. I bought a building as a short sale recently, and it took five solid months. Plus I must have made 500 phone calls to various parties. The irritating thing is that the bank (or banks, in my case, since there were two different ones) will sit on your offer for months, but then when they finally accept it, they’ll want to close within days.
I would say that if your lease ends March 1, you should definitely get moving on this, and have a backup plan in case the deal doesn’t go through by March 1. Oh, and be prepared for a hassle getting a mortgage, even if your credit scores and employment history are good.
That is a definite YES. Until the bank approves it, you have no contract and can cancel the offer at any time. All its takes is a phone call to your Realtor.
Contracts are not contracts until all parties approve.
I did that this summer. We lost the house we really wanted and the second choice was a short sale. We made our offer on that one and kept looking. Two months later, there still wasn’t any activity on the short-sale house and the original one was back on the market. We made an offer on the original one and as soon as it was accepted, withdrew the offer on the short-sale house. That part was easy. If you keep looking and don’t find anything, at least you’ve got a head-start on the paperwork for that one.
I drive by that one, and it’s still on the market more than two months after we pulled our offer.
I definitely plan to act very soon (an offer today, if possible) and will try my best to not get my hopes up. It sounds like it’s very much a gamble but I don’t have a lot to lose.
On the bright side, I have a lot of family in the area. If things get close to lease move out day but are actually in motion, it’s not inconceivable to move all my stuff into storage and find a place to crash - just a gigantic pain in the ass.
Five months, though?! No way I could wait that long.
Annie-Xmas, thanks for your thoughts. In your experience, do a lot of buyers try to navigate this gauntlet? Or, does it turn most people off?
I’ve never owned a house before, but I’m a consummate renter. One other thing you might try is to talk to your landlord now and see if you can either:
A. Extend your lease by a month or two to give yourself some wiggle room; or
B. Go month-to-month after your lease expires.
I’ve done B, and it involved a significant premium (couple hundred a month) once the lease was up. Obviously A would cost you a couple months’ rent as well if you close early. But in the grand scheme of things it might be worth it.
The advantage of acting now is that you can talk to a decision-maker if you have to. The property owner might turn out to be a lot more flexible than the person/company he hires to administer the place. The owner wants to make money; the manager wants to avoid extra work. YMMV, of course.
Just out of curiosity, what is the delay on the bank side? You’d think they’d have an interest in having liquid assets drawing interest rather than a chunk of real estate somewhere not earning them any money.
Mostly it is verifying the funds, making sure the seller has no hidden assets and that the bank is getting as much as they can, and that the homeowner is walking away with absolutely nothing. It takes them forever to decide that they would rather get less for the property instead of going into foreclosure.
We did have a short sale offer that the buyers back out of, and now the property is in foreclosure.
My impression is that these days, banks are simply overwhelmed. And moreover, this particular piece of property may not be very high on their priority list.
I rent from an individual guy. He’s been very resistant to month-to-month in the past, though an extension may be possible. However, he’d want a commitment immediately (the guy is kind of a jerk, frankly) which I’m not willing to give, so, it’d have to be a last minute thing.
Banks do not think outside of the box.
In order for the bank to accept the offer in a short sell it has to clear the loan committee,
After foreclosure it goes to a different office. Where there are det check lists.
My realter has seen a house in short sale have 9 offers around $350,000 but the bank would not make a desion. The house went into foreclosure. It went back on the market at $300,000 and not one offer.
Just for us not familiar with the terminology- is a short sale one where a bank is selling out from under the purchaser who can’t meet the commitments?
A “short sale” is one where the bank(s) agree to accept a sale price less than the amount the seller owes on the mortgage, and cancel the remaining debt. The bank gets some money, the foreclosure does not appear on the seller’s credit report, and the seller walks away with nothing.