What is a short sale?A short sale is when a property's net market value is less than the loan amount and the seller will/can not pay the difference at closing. This commonly occurs when there are large price reductions in real estate values. For example, if a seller will net $200,000 on the sale of his/her property after paying their closing costs and before paying off the loan and the loan balance is $250,000 then they are $50,000 short. Besides the seller bringing $50,000 to closing there are two common ways to get this property to close. The bank can take the loss or hold the seller responsible for the difference owed. Either way this third party lending institution is involved in the sale and will protect their interests.
Back to topHow will I know if the property is a short sale?When a property is listed with a Realtor today, the Realtor listing form asks for the current loan balance(s). If that amount is more than the market value less closing costs then the Realtor should talk with the seller about their ability to pay the difference at closing. If the seller can not pay that difference then the Realtor lists the property as a "potential short sale". This "potential short sale" is a feature that is commonly included in most listing information. You can also do an advanced search on the Scott Team Realty web site for potential short sales.
Back to topAre there any additional costs for a short sale property?There may or may not be additional costs associated with purchasing a short sale. Unlike normal sales, the seller has no money to pay the buyer's agent. In the seller's lender response, they often reduce your agent's fee for service. Therefore you may be responsible for a portion of that fee. Furthermore, short sales are always sold in their present condition. If some maintenance needs to be completed to make the property habitable then you will be responsible for that. When making an offer, take into account these possibilities. Once you receive a response from the seller's lender and have an exact amount you can then make a decision if the property is worth the cost.
Back to topWhat is the under contract continue to show status?This status of listings is common for short sale properties that have a contract on them already. The local Outer Banks MLS requires that properties in this status continue to be included in the active listing data information because buyers often get impatient and void their contract.
Back to topHow long will it take to get an answer?Getting a response to your offer can be as long as six months or as short as a couple weeks. It depends upon how far along in the short sale process the seller already is. If they have provided the bank with all the required information and an asset manager/negotiator has already been assigned then it could be just a week. Most of the time it is months instead of weeks because the seller has to provide the lender with their personal financial information, and the bank has to determine what price to accept for the property. This process involves getting third party Realtors or appraisers to provide the bank with an opinion of value. All this takes time and many of the lenders have hundreds of these short sale files to handle.
Back to topWhat kind of response should I expect from the seller's lender?Most of the time the response from the seller's lender is based on their opinion of what the property is worth. Once a buyer has a contract on the property and all the paperwork has been submitted to the lender, they will order an appraisal and/or a broker's opinion of value. The lender will look at the cost of foreclosing and what they can reasonably expect to receive for the property once they own it. If they believe they can do better than the current offer then they are likely to reject or counter the buyer's offer. The further the offer is from the fair market value of the property the less likely the bank will respond with a good response.
Back to topCan I void the contract if a better offer comes up?The standard short sale addendum to the offer to purchase allows the buyer to void the contract for any reason up to the time that they receive a response from the seller's lender. Many buyers today use this strategy in purchasing a property.
Back to topIs a short sale different on vacation rental property?When purchased during the first half of the year vacation rental short sales can be different. This is because the seller has often already received and spent a portion of that summer's rental income. State statute allows the management firm to disburse up to 50% of the rental proceeds prior to the tenant arriving. It is best not to count on the rental income. The buyer then may end up owning the property and not be getting the proceeds all from those vacation rental tenants that paid before he owned the house. Those weeks still must be honored.
Back to topThe seller's lender is asking for my DOB and Social Security Number. Should I give it to them?Some lenders require this information from a buyer prior to negotiating. They want this information to make sure that it is not a relative of the current owner who has made the offer. Lenders typically do not allow short sales that are not "arms length transactions".
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