Education is the Key a to Successful Short Sale Transaction
What is a Short Sale?
A short sale means that the seller’s lender is accepting a discounted payoff to release an existing mortgage. The bank is willing to take less than is owed on the property. Typically, the seller does not receive any funds from the sale proceeds. In some cases the seller is offered a relocation incentive to assist with moving expenses or a cash incentive to sell via short sale vs foreclosure. The short sale is the sellers’ last effort to avoid foreclosure. The lender may or may not accept multiple offers while reviewing the file.
Traditional Short Sale Vs Approved Short Sale Vs HAFA Short Sale
Traditional Short Sale
It’s a regular short sale of a property in which the lender is accepting a discounted payoff in lieu of foreclosing on the property.It can take longer to close than a short sale where the lender has already approved a list price, because the lender has not reviewed the file at all.
Approved Short Sale
It’s the same as a traditional short sale except that lender has already approved a list price on the property. There is no guesswork as to what the bank is willing to accept for the property. The lender has done their due diligence regarding the property; reviewed sellers’ financials, obtained a BPO (Broker Price Opinion) a Realtor produced value of the property, obtained all sellers documentation to proceed with the sale. This type of short-sale closes faster, because all the preliminary steps have been completed.
HAFA Short Sale
It stands for Home Affordable Foreclosure Alternative. This type of short sale is offered by the lender under the rules and regulations of the Department of the Treasury & Housing and Urban Development. The lender completes their due diligence regarding the property in order to approval the short sale. This HAFA Short Sale benefits the seller more than any other type of short sale, because in addition to guaranteeing the 3k relocation assistance it ensures a waiver of a deficiency judgment. A deficiency judgment can be filed against the seller/borrower by the lender up to 10 years after a short sale; this is the short fall on the amount the seller/borrower owed on the property. The buyers and sellers will be required to sign documentation and or disclosures in order for the HAFA Short Sale to be in compliance.
How Can I buy a Short Sale Property?
You must first obtain a Realtor whose niche is short-sale transactions. An agent with this type of experience will help to expedite your transaction and protect your interests. These properties are listed on the MLS, multiple real estate sites i.e. Realtor.com, Trulia, Redfin, Zillow etc., newspapers, and real estate magazines. Anyone can buy a short sale property. These properties are handled similar to homes on the market that are not in a Pre-foreclosure state. The main difference is that even though the owner accepts your offer for the home it does not mean you have a completely executed transaction. It’s only the first step in this process.
Bank Approval Must Be Obtain First
The bank and or banks holding the mortgage or mortgages have the final say as to whether they accept your offer to purchase the property. The bank can counteroffer, can re-negotiate Realtor’s commissions, can require buyer and or seller contributions, most likely will not pay repair costs, and can demand faster closing dates. An As-Is Contract will be required by the lender. Once the lender approves your offer your contingency deadlines begin; inspections, appraisals, and financing approval.
Obtain a Preliminary Lien Search
Request that the Title Closing Agent obtains a preliminary lien search of the property prior to the inspection contingency period deadline. There can be many types of liens attached to the property; i.e. 2nd or 3rd bank liens, construction liens, utility liens, county or city liens, federal tax liens etc. If these liens are not negotiated simultaneously or a payoff is obtained it can hinder the deal from closing in a timely manner or even jeopardize the closing on your dream home.
During the Process All Parties Must Maintain an Open Line of Communication
Your Realtor is the key to a successful short sale closing. Short Sales are complex transactions. You are dealing with multiple parties. The seller, buyer, short-sale processing company/agent, appraisers and lender (bank and or banks). These closings can take longer than traditional real estate transactions, because the bank has the final approval power with their own timeline. The bank has no emotional ties to the property. The Realtor must stay in constant contact with the lender and or processing company/agent involved to ensure a timely closing. You don’t want to miss an important detail due to an inexperienced Realtor or find out the transaction is not going to close, because no one has followed up in a timely manner.
Successfully we have closed Short Sale transactions with all the major lenders; therefore, our experience & knowledge stream lines the process and allows a quicker closing for both seller and buyer.