Many folks have been wrapped in a web of frustration trying to purchase a short sale or pre-foreclosure.
What is a short sale?
Simply, it’s when Mr. Jones bought a house with a home loan of $250K. The market tanks and he can sell his house to you, but you won’t buy it for more than $150K. Mr. Jones’ is short $100K.
What is Mr. “Short Sale” Jones to do?
He must have the bank agree to take a $100K loss due to his own economic or financial hardship.
The longest short-sale, I have been involved with from purchase to close-of-escrow lasted from February 5, 2009 to May 28th. Let me do the math for you… that is 112 days.
You asked, “Isn’t that too long?” My answer is “Yes.”
Should you wait? My answer is no. Especially, since there so many properties available and we don’t know if the bank will even accept the offer.
My feeling is that the only time you should stop searching is when a seller has accepted your offer, SIGNED the purchase offer AND the property is advertised on the MLS as “Pending/Active with Contingencies” but not “Active/Available.”
3 Things You Didn’t Know About Short Sales
1. They should be called “Wait and See” Sales.
2. Some listing agents still “Shop” offers under the guise of asking for your “Highest & Best Offer.
3. The property is really not “Active/Available” to show. There 25 other offers the agent is not telling you about.
Since these were things I previously didn’t know about short sales myself, I created a list of questions that I ask every time before I either submit an offer or view the property with my first-time investor or home buyer clients.
7 Questions To Ask The Short Sale Listing Agent Before You View The Property
1. Have you already packaged the short sale documents?
2. Have you already submitted the short sale package to the bank?
3. Did you submit a “dummy” offer to get the ball rolling with the bank?
4. Will you have the seller sign my offer?
5. Will you place the property on the MLS Active With Contingencies?
6. Have you worked with this bank before?
7. Does the seller have a 2nd or a home equity line that’s being affected?
For my continuing education hours, I recently took a course on Mortgage Loss Mitigation. Here’s what I learned…
10 Questions To Ask The Distressed Home Owner
- What is your hardship?
- Is there a co-signer on your mortgage?
- Is this your primary residence?
- Who is your lender?
- Have you signed anything in the past 12 months to change title?
- How many mortgages do you have? (not uncommon to see first, second and third)
- how many months behind are you?
- Have you received a foreclosure notice? If so, what is the timeframe?
- Have you filed any bankruptcy paperwork?
- Are you past due on property taxes for each a way?
3 Must To Steps For Homeowners in Trouble
- Get a copy of your credit report. A free copy can be obtained online at the government mandated site www.annualcreditreport.com
- call 888-995- Hope to explore any possibility to keep your home( only if it is a primary residence)
- Make copies of all your financial statements for the financial distress package.
The main thing that will learn at the mortgage loss mitigation workshop is that the homeowner is financially screwed. Therefore they might as well talk to a bankruptcy attorney to find out the worst-case scenario. There should be no cost for an initial consultation so you might as well get the big picture of your financial landscape.
The other major thing that I learned was to make sure you get the forgiveness of debt letter not just a lien release. Because a lien release is not releasing you of the debt owed. Basically a lien release has as much worth as used toilet paper.