Tuesday, February 1, 2011
Short Sales 101; a refresher course
It isn't a secret that there is no shortage of short sale listings for sale at the moment in Sacramento....in fact many of my listings are short sales.
I fielded a call today from a very nice woman who was just starting her home search, and she was looking for detail about one of my listings. She was unfamiliar with short sales...I found myself explaining exactly what a short sale is, the difference between different MLS listing statuses, listing price vs. offered price vs lender approved price, timeframes, etc. Since we are being teased with this nice weather, and new buyers are starting their home searches, I thought I'd post a little short sale refresher...
If you are not familiar with what a short sale listing is, basically the seller owes more on the house than it is currently worth, so they list the house and attempt to negotiate a lower payoff with their mortgage company so they can sell the house. Keep in mind that purchasing a short sale is A LOT different than a traditional re-sale real estate transaction with an traditional seller who has equity. I tell my buyer clients to take everything they think they know about buying real estate and throw it out the window. A few things to note:
-There are different statuses in MLS that will reveal a bit about the listing. An "Active Short Sale" status indicates that the home is offered as a short sale, and no offers have been submitted to the seller's mortgage company for review yet. An "Active Short Contingent" status indicates that one or more offers have been submitted to the seller's mortgage company for review (meaning, your offer would likely wait in line behind others). These statuses must be updated by the listing agent, and they are not always 100% up to date.
-The price listed in MLS may not be the price the seller's mortgage company is willing to accept. If the listing agent is competent, he / she will have listed it at its current market value, however sometimes you will see a price that is "too good to be true." The seller's mortgage company will do its own valuation or appraisal (often referred to as a BPO - or Broker Price Opinion) to validate the offered price. The bank may counter your offer. Heck, they may counter a perfectly reasonable market value offer too...
-In addition to the possibility of countering the price you offer, the lender may counter certain terms...meaning for example that they may not be willing to cover the costs of that $400 home warranty you ask for. So prepare yourself for the worst case scenario of paying for things like that yourself.
-The term "short sale" is often confused with a quick time period and close of escrow. Short sales are not necessarily quick. The average waiting period for the seller's mortgage company to approve the short sale is around 60-90 days. Some take less time...some take A LOT more time. The fastest approval I have received on one of my short sale listings was 11 days. The longest was almost 2 years. There are SO many variables that will dictate the length of time it takes to get approval...like which lender services the mortgage, which entity owns the mortgage, how many loans there are on the house, how knowledgeable the listing agent is, how cooperative the seller is with the process, if the seller is trying to use a government short sale program, etc.
So.......fasten your seatbelt. My advice to you is to find a competent Sacramento short sale agent to help you navigate the process.