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How Often Do Banks Accept Short Sale Offers

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Is A Short Sale The Same As A Foreclosure

What is a Short Sale? – How Do Short Sales Work?

A short sale is not the same as a foreclosure. In a foreclosure, the bank repossesses the property and then tries to sell it for enough to recover its costs. In a short sale, a bank accepts that it wont recover its outlay, and its considered the better option than dealing with the red tape involved with foreclosure and then going forward with handling a separate transaction.

What The Listing Agent Should Know To Successfully Negotiate A Short Sale

THIS SHORT SALES WORK FLOW IS AN EDUCATIONAL TOOL INTENDED TO GIVE BROKERS AND SALES ASSOCIATES A COMPREHENSIVE OVERVIEW OF THE SHORT SALE PROCESS . IT IS NOT INTENDED TO AND DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE, AND SHOULD NOT BE INTERPRETED AS POLICY OF THE NATIONAL ASSOCIATION. TO THE EXTENT LEGAL, FINANCIAL OR TAX ADVICE IS NEEDED BY A MEMBER OR A MEMBERS CLIENT OR CUSTOMER, THOSE INDIVIDUALS SHOULD BE ENCOURAGED TO CONSULT WITH THEIR LAWYER OR ACCOUNTANT.

STATE AND LOCAL ASSOCIATIONS MAY SUPPLEMENT OR MODIFY THE SHORT SALES WORK FLOW BASED UPON LAWS AND REGULATIONS AFFECTING THEIR JURISDICTION. INDIVIDUAL BROKERS MAY ALSO USE THE SHORT SALE WORK FLOW AS THE BASIS FOR THEIR FIRMS BROKERAGE POLICIES BY MODIFYING IT, WITH THE ADVICE OF COUNSEL, TO REFLECT NOT ONLY STATE AND LOCAL LAWS AND REGULATIONS BUT ALSO THEIR FIRMS POLICIES AND PROCEDURES. REALTORS® AND MEMBER BOARDS ARE AUTHORIZED TO MODIFY, REPRODUCE AND DISTRIBUTE THE SHORT SALE WORK FLOW.

THE CONTRIBUTIONS OF REALTORS® SERVING ON THE NAR RISK MANAGEMENT, MULTIPLE LISTING ISSUES AND POLICIES, PROFESSIONAL STANDARDS, AND CONVENTIONAL FINANCE AND LENDING COMMITTEES TO THE DEVELOPMENT OF THIS DOCUMENT AND OTHER EDUCATIONAL AND INFORMATIONAL TOOLS TO ASSIST REALTORS® DEALING WITH SHORT SALES ARE GRATEFULLY APPRECIATED.

Tips For Making An Offer On A Short Sale

Thinking about adding a new investment property to your portfolio? Making an offer on a short sale is one of the best ways of getting good real estate deals.

If a property is being sold for less than what the owner owes in an outstanding mortgage, the sale is considered a short sale. Homeowners are forced to make a short sale due to reasons such as excessive borrowing, job losses, and declining home values.

However, a short sale should be distinguished from a foreclosure. A foreclosure happens when the sellers lender repossesses the property and sells it themselves. Quite often, homeowners attempt to make a short sale in order to avoid foreclosure.

Related: What Is a Short Sale in Real Estate Investing?

While buying short sales is a great opportunity for real estate investors to purchase property for under list price, making an offer on a short sale house is not easy. There are numerous potential pitfalls that buyers need to be aware of while learning how to make a short sale offer.

To ensure the process goes smoothly, here are 7 helpful tips for making an offer on a short sale:

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What To Consider When Selling A Home Through A Short Sale

Although short sales have some advantages over foreclosure, there are still several things to think about before starting the process.

First, short sales can take some time to complete. The exact time frame will vary, but you must plan ahead, especially if the lender intends to foreclose on your home while working with you to approve a short sale.

Second, the bank has the final say in the short sale of the property, not you. Thatâs because theyâre the ones who have to take a loss on the sale.

Buyers and sellers of a short saleâand their representatives âcan handle many aspects of the home-buying process. But the most critical aspect of a short sale is that the lender must approve the terms of the buyerâs offer. The seller will be the one to present the lender with the buyerâs offer for short sale approval.

The seller must also prove to the bank that theyâre facing significant financial hardship and have no realistic chance of fully repaying the mortgage balance. Examples of financial hardship include prolonged unemployment or extensive medical bills. As a general rule of thumb, lenders are more likely to agree to a short sale when the homeowner has experienced a recent financial downturn as opposed to one thatâs been around for a long time.

Why Short Sale Pricing Is Unreliable

IGCSE Business Studies, IGCSE Economics, A Level Economics ...

You cannot hang your hat on the list price of a short sale.

The only thing a list price tells you is how much it takes to get the seller to sign a purchase contract, and sometimes they won’t even do that.

In some Multiple Listing Services , listing agents are required to tell buyer’s agents if the seller will not accept list price, but not all MLS companies require that disclosure.

If the list price is too low, the bank will reject the short sale. Moreover, a low list price could be a strategy used by the listing agent and seller to entice multiple offers on the short sale.

In short, the list price of a short sale could mean nothing at all.

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How Does A Short Sale Work In Arizona

The process to end up at the Short Sale option typically works like this: The homeowner begin to miss payments for various reasons If you must sell your Arizona home you basically have three options. If playback doesnt begin shortly, try restarting your device.

A short sale is the sale of a home for less than the homeowner owes on the mortgage. A short sale typically occurs when the homeowner has fallen behind on the mortgage payments due to financial hardship.

An Example: A Short Sale We Listed

To illustrate the challenges in dealing with Florida short sales, we share the story of a property we had listed for two years in a depreciating market. Initially, we had a buyer willing to buy the house for $1.2 million, but the lender was not ready to accept it.

Fast forward 15 months and the lender took 280,000 dollars less. Why? In this case, the first Buyer was ready willing and able, the Lender had all of the required info to make a decision, the appraisals supported the offer, but the Lender was not ready to take the loss on the loan and release the Seller from any further liability.

15 months later we worked with a negotiator at the same lender with years of experience who is paid for performance. The difference: We went from contract to closing in 60 days for 280,000 dollars less. Like all things in life, a short sale is all about the people. In this case, the Lender actually wrote off the additional $280,000 and released the Borrower from the additional monies.

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What Happens If There Are Two Loans On A Short Sale

If there are two loans on a short sale, you will need the consent from both lenders to close. You are taking a risk if you move forward with an appraisal or home inspection before you receive approval from both lenders. One lender might agree while the other might reject the short sale or object to the seller contribution on the HUD.

A short sale occurs only with the lenders permission when a homes value has declined, and the mortgage holder owes more than the home is worth. In this scenario, the homeowner has negative equity and may need to get rid of the home.

Its All In The Numbers

Get More Short Sales Approved Faster (BPO)

In real estate investing, it is said that the money is made in the buy. This means that a good purchase price is often the key to a successful deal. If you can get a property for a good price, you increase the odds of coming out ahead when it comes time to sell. If the purchase price is on the high end, on the other hand, youll likely watch your profit margin erode.

You should be able to buy the property, put it in great condition, and sell it at a price where you can still make a profit. Investors need to be able to turn around and sell the house quicklytypically at below-marketand a good purchase price makes this possible.

The purchase price is only one important number, however. Youll have to make some other calculations as well, including:

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When Should You Close An Option Position

Options are decaying assets. Buyers of an option position should be aware of time decay effects and should close the positions as a stop-loss measure if entering the last month of expiry with no clarity on a big change in valuations. Time decay can erode a lot of money, even if the underlying price moves substantially.

Here Are Some Items To Include In The Short Sale Package:

  • A Comparative Market Analysis

The bank will want evidence that the real estate market will not support a price to pay off the mortgage balance. Make sure the Comparative Market Analysis is up to date and reflects similar homes in your area that have recently sold. If prices are dropping, point out that trend so the bank will not expect to get more if they foreclose, repossess your home and sell it down the road.

  • Your Hardship Letter

Your hardship letter is your chance to explain why you are having financial difficulties and why the bank should accept your short sale. Maybe you lost your job, there might be an illness in the family, or you may be in the middle of a divorce. Tell the bank if you are a senior citizen, and let them know if the short sale will prevent you from having to file for a bankruptcy.

  • Your Income and Expense Sheet and Supporting Documents

Provide the bank with a balance sheet that clearly shows your monthly income and your monthly expenses, so the bank can see why you are having trouble coming up with your mortgage payments. Give them bank statements and other documentation to support the balance sheet. Include copies of your income for the last couple of months. The bank will also want to see your federal income tax returns for the last two years as well.

  • An Arms Length Affidavit
  • The Offer to Buy
  • Settlement Statement

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Who Should Buy A Short Sale Home

There are often challenges anddelays when buying a short sale home which is why a disproportionate numberof short sales are taken up by professional property developers andhouse-flippers.

These potential buyers are notemotionally invested in the transaction and can shrug off delays right up untilthey pay the purchase price and take possession. They may not care much even ifthe deal falls apart if they have multiple others in the pipeline.

Its different for individual home buyerswho arelooking for somewhere to live, because they couldbe in a sticky situation if the sale falls through.

Maybe youre well-situated to waitout a short sale, and these pitfalls wouldnt pose a challenge for you.But theres a good reason so many private buyers leave short sales to the pros.

Who Owns The House In A Short Sale

8 Ways to Make Your Offer Stand Out in a Competitive Market

A short sale is when a home owner sells his or her property for less than the amount owed on their mortgage. In other words, the seller is short the cash needed to fully repay the mortgage lender. Typically, the bank or lender agrees to a short sale in order to recoup a portion of the mortgage loan owed to them.

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Get Approved For Financing

As with any home purchase, the first step is getting approved. While its always beneficial for buyers to obtain preapproval before making an offer, its even more important in a short sale, as the lender will want to ensure that the new buyer is actually capable of purchasing the short sale property.

With Rocket Mortgage®, the process of securing approval is fast and convenient. It can be done online by filling out an application and providing us with permission to check your credit score, and sharing information regarding existing income and assets. Based on your financials, well recommend mortgage options and tell you how much youre approved to borrow.

After you’ve shared documentation around income and assets, see your options. Well give you a Verified Approval1 that will demonstrate that youre a qualified, serious buyer.

How To Get A Good Deal On A Short Sale

Is it possible to save money by buying a short sale? Absolutelyyet not every short sale is automatically a deal. Make sure that your agent provides you with recent comparables . Just because the seller isnt getting any money out of the sale of the house doesnt mean they will automatically accept your offer.

Keep in mind bidding wars can happen before the listing agent submits the highest and best offer to the lender. How do you ensure that your offer will get accepted over others?

Theres no one winning formula, and its not always about the highest price. For example, the financing and terms are also important. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment, according to an article in Realty Times.

An important point to consider is that with some short sale transactions, the junior lien holders may require the buyer to come in with extra cash to release the liens.

So, when the listing agent markets a property at $200,000 based on comparables, the lender in 1st position may accept a purchase price of $205,000, but the lender in 2nd position may require an additional $6,000 to release the lien. Every transaction is different, luckily. Buying a short sale where the owner only had one loan is generally going to save you time and money, but in certain markets, those are far and few between.

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Third: It Is Critical To Have All Documents Ready For The Lender Review When An Offer Comes In

The short sale package is fairly standard throughout the industry, but some banks will have additional documents for the parties to sign. The short sale package will normally include:

  • Two years of tax returns
  • Bank statements for the past two months
  • Pay stubs for the past two months
  • A financial statement
  • A letter explaining the sellers the involuntary hardship

Sending in a complete short sale package for review to the lender the first time makes a big difference in expediting the short sale timeline. Missing documents will slow the process down because in most instances the review will not proceed unless the lenders loss mitigation department receives all required documents.

Since the foreclosure process may not stop while a short sale is under review, it is vital to submit the short sale package before any pending foreclosure hearing date.

What Happens When You Buy A Short Sale House

Wholesaling A Short Sale: How To Get Short Sales Directly From Banks

When the market finally drops, the owner is left with little equity and a mortgage that a sale will not pay off. Buyers end up owing more on the home than it is worth. Youre not automatically picking up $100,000 in equity if you purchase a short sale home for $400,000 that sold for $500,000 a few years ago.

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Why Are Foreclosures Cash Only

Buying your foreclosed property with cash: A cash purchase means you wont have monthly loan payments, and will avoid the interest expense and closing costs involved with financing. You may be able to negotiate a faster closing on your home because you can eliminate the additional time involved in obtaining financing.

Will The Bank Approve My Short Sale

Elizabeth Weintraub is a nationally recognized expert in real estate, titles, and escrow. She is a licensed Realtor and broker with more than 40 years of experience in titles and escrow. Her expertise has appeared in the New York Times, Washington Post, CBS Evening News, and HGTV’s House Hunters.

Many underwater sellers are worried that their banks may reject a short sale when the truth is, if the seller and the property qualifies, most banks will readily approve a short sale. As with most truisms, though, there are often exceptions.

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Can You Short Sell Your Home To A Family Member

If you can however show documented offers which have been lower than what your family member is willing to pay, along with proof of sale of similar properties in the area, and if the short sale process has taken more than a few months to close, a lender might reconsider allowing the exemption on the sale.

Don’t Get Caught By Expensive Surprises

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A successful short sale could mean you’re getting an amazing deal and paying far less on a piece of property than it’s worth, and everybody else is walking away happier for your participation, as well. Be very certain about what you’re purchasing, though, as hidden costs could eat very quickly into your perceived profit.

First and foremost, do a thorough title search before making an offer on any pre-foreclosure property. There may be debt attached to the property that you’ll be obligated to pay, including any liens and associated fines, late association fees, older mortgages and even late utilities. Be sure you do a thorough inspection of the exterior and interior to know what repair expenses you’re likely to pay to make the home habitable. Also, find out if any home improvements are subject to city approval. If a certificate of occupancy was either not filed after an improvement or was rejected, you’ll adopt those obligations.

A number of these unexpected expenses could completely wipe out any profit you can expect from a short sale, so be sure to do your homework.

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