If you're thinking of buying a short sale right now you might want to learn to be patient. Actually, you might want to wait. Wait to lock in your rate, wait to cancel your lease, wait to make any plans to actually move into the home, wait to do anything that might jeopardize your purchase...
Short sales are a great deal, they can sometimes be as much as 50% of the value. However, the turnaround time with the banks is a huge problem (up to 2 weeks per response if not longer), however, it's only part of the equation. The other part is the listing agent on the home. How skilled are they, really? NAR recently said the average short sale closing takes 90 days. In my experience it's been 90 days for a very communicative bank, but more often it is closer to 6 months. That's a long time, especially with market fluctuations and complete loan program changes and even legislative changes.
The keys to making sure you have a smoother ride is making sure you have a great agent on the buying end. The listing agent may or may not be skilled at short sales, but everyone wants a closing. At this point it's the luck of the draw.
Some good signs are frequent updates. If your agent is getting a response back from the listing agent it might mean that they talking to the bank a bit more frequently.
It's a long process, sometimes one that is worth it. Word to wise, if you have an agent helping you with a short sale, it's lot of work, stick it out with them or tell them it's time to move on to another home. Don't send them an e-mail about you being too impatient to wait, you've been warned.
Joshua - This is a subject that cannot be easily tackled. There are so many variables the selling agent may not be aware of that affect the viability of the short sale.
With short sales, it is definitely a listing agent's world. However, there are a few things a selling agent can do to minimize his or her risks. One of these things is checking the closing history of the listing agent by searching for their name in the MLS. You can even limit the search to closed short sales, and this will give you assurance that the listing agent has a successful history of closing short sales.
Another thing a selling agent can do is to contact the listing agent to request information about the listing, such as how many lenders are involved. If there is only one lender, the chances of negotiating a successful short sale increase dramatically. If there are two different lenders there needs to be enough to give the first full payoff and a minimum of 10% of the original loan amount to the second to be a viable short sale. This is not a rule so much as a guideline to better your chances.
Good information. It is amazing how often short sales can be troubles. One thing to remember is the people at the bank handling these are the accountant types, not the lender types. A whole different mentality about urgency.
JOSH-You should start to look for agents with the CDPE designation. They're Realtors that have gone through the educational process of getting the short sales listed, negotiated and approved. They have been recognized by the Florida Association of Realtors and recently they were endorsed by Howard Britton and the Star Power organization. You are with KW, as I am, and they are doing an online MAPS course.
www.CDPENOW.com
question, if you have a purchase and sale agreement with the seller, does the realtor still send "all" prospective bids to the bank that could outbid you? or does the bank only get the one offer at a time to decide on for the short sale?
Wendy,
Typically in a short sale the bank only looks at the one submitted offer, not other offers that come in. However, an agent COULD collect multilple offers in an effort to increase the offer or get the best offer.
There should only be on "contract" submitted to the lender and any other "offers" could be held as back-ups in the event they might be needed at a later date.
Submitting several contracts will only slow down the process and could compel to the lender to wait for a number they want.
I've tried to do two short sales this year (as a Buyer's Agent) and whew! what a rollercoaster ride.
I am an investor. I'm not an agent, but I have successfully negotiated almost 100 short sales over the last 6 years. I do have the experience of working as the Portfolio Manager for a top 5 Mortgage Servicing Company for over 10yrs...so I know the ins and outs on how the whole process works. Plus, there is no substitution for experience. There are just some things you can't learn from a class or a book, they have to be experienced to know and understand them.
As the listing/selling agent...you have to understand you help control the listing price. If you haven't done the BPO, you need make sure you are keeping a breast of the current values of the home constantly. In this volitale market, the value of the home could be dropping weekly...but you have to communicate that with the bank...or you'll never sell it. Also, finding a competent company like mine, that handles Property Preservation, can also help you get a better rating with these Asset Management Companys...thereby getting you more sales and more listings. By utilizing my company, we can help you better evaluate the mechanicals of the property, and the cost associated with any appreciation services that may need to be done (ie...replacing the hot water tank).
If you are the buyer agent (which means you are likely working with an investor or a savy homebuyer). In these cases, you can also utilize a company like mine to help you evaluate the true value of that property plus any repair costs that your client could be absorbing by buying an "as is" property.
The originator of this blog is correct. I've seen short sales take as long as 9 months. But, I've also seen them take as short as 30 days. It really depends on the company you are working with. I've found that smaller companies tend to work through this process much quicker. There is also a difference if the property is in the "Foreclosure" process or if it is in an "REO/Bank Owned" state. I have seen and experienced many a time where it has been more purdent to let the property go to sheriff's sale then pick it up for less after it is an REO. For whatever reason, there seems to be a huge gap in the whole process from the time properties go from Foreclosure to REO. I have personally offered one amount for a Foreclosure and have it denied, then be able to pick the property up for $5-10k less after it went to Sale and is then an asset on the bank's books.
All I can say is be leary of the $8/hr clerk on the other end of the phone when you are dealing with the Loss Mitigation Dept. Most of them don't know what they are doing, they only know what they are told. Generally speaking, if you want to get the best price for your client, you generally have to end up speaking to the Supervisor or Manager Level. In the end, it is up to you to validify the value of the offer you are making. Do your homework and set your price and make sure you stay on the bank back about getting your answers. Remember, the sqeeky wheel gets the oil...and this is oh so true when working with banks.
Good point. I have sold two short sales, one on each side of the table. Waiting is an important part of this game
Don