short sale advise

[adias]

I am looking into buying a short sale and would appreciate and advise and words of caution from those who are knowledgably in such matters.

[Dennis]

Here are several items to keep in mind:

1. Be prepared for delays. i.e. the lender making the decision on whether to accept the short sale may take longer than your loan commitment if you are obtaining financing. This could impact your loan rate.

2. Be prepared for a possible counter-offer from the lender.

3. The decision to accept a short sale may not be made by just the lender. It could also include the investor or insurer. i.e. HUD, FNMA, FHMLC or an MI Company. This can add to the time it takes to obtain an approval.

4. Be patient, there really is nothing you can do except wait for a decision.

5. If there are subordinate lien holders, your chances of a successful short sale will diminish dramatically.

&

6. After all of this, your deal can still fall apart.

However, with all of this being said, if everything comes together, you can pick up some great bargains! Just be patient.

Good Luck,

Dennis

[John S. Rabi]

quote:

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Originally posted by adias
I am looking into buying a short sale and would appreciate and advise and words of caution from those who are knowledgably in such matters.

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Dennis pretty much nailed it down, the only thing I would add is to make sure your real estate agent knows short sales inside and out, and knows how to write up such an offer.

I had two shor sale deals this year, one was a breeze while the other one was a nightmare.

Aloha,
John S. Rabi, GM,PB,ABR,CRB,CM,FHS
888.819.9669
johnrabi@johnrabi.com
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
(This is what I think of the Kona Board of Realtors http://KonaBoardOfRealtors.info)

[DanielP]

Generally, it takes months and months and months.

[John S. Rabi]

quote:

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Originally posted by DanielP
Generally, it takes months and months and months.

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The first one I mentioned took only two months. The second one has been going on for five months and we just got the final approval. It will close at the end of September, so that will be six months.

Aloha,
John S. Rabi, GM,PB,ABR,CRB,CM,FHS
888.819.9669
johnrabi@johnrabi.com
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
(This is what I think of the Kona Board of Realtors http://KonaBoardOfRealtors.info)

[Kapohocat]

A nice couple all the way from that other Kapoho subdivision ( [] ) picked up a short sale down the street from us! The price was incredible. (of course I thought it might be a tear down - but they are bringing it back to life! Good thing they saved a lot of money on the purchase price!)

Took about 6 months or so to close.

[adias]

Thanks for the tips. Always wondered why short sales stay in contingent on MLS for so long.

Ok, lets assume you make and offer and it gets accepted. Then you do the inspection and results are satisfactory and finances are ready to go. Then you patiently wait for the other side to get their paperwork in place.

I am assuming the final walk-through is critically important in this scenario since the lag between initial inspection and possession of premises is months down the road?

Also what if the premises has pre-existing tenants who are on a month-to-month lease and you get the house and tenants at a bargain price!!! What steps are advisable to protect yourself?

Finally, what is the point of no return; at what point can you change your mind and walk away from the deal? (six months from now anything can happen)

[John S. Rabi]

quote:

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Originally posted by adias
Ok, lets assume you make and offer and it gets accepted. Then you do the inspection and results are satisfactory and finances are ready to go. Then you patiently wait for the other side to get their paperwork in place.

I am assuming the final walk-through is critically important in this scenario since the lag between initial inspection and possession of premises is months down the road?

Also what if the premises has pre-existing tenants who are on a month-to-month lease and you get the house and tenants at a bargain price!!! What steps are advisable to protect yourself?

Finally, what is the point of no return; at what point can you change your mind and walk away from the deal? (six months from now anything can happen)

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Gosh, that is EXACTLY why I said make sure you have an agent who knows short sales inside out! Your offer should be written in a way that all contingencies will start AFTER the short sale is approved, and not after the seller accepted your offer! The Final Walk Through is always important, however, you do not have any bite with the bank, they will not fix anything, and the seller probably will not care, so you should have a final walk through cancel cause. Tenants on a month-to-month lease have to be given a 45-day notice to vacate. If you want to take them over you will need to negotiate a new lease with them. Also note that if the tenants are mentioned anywhere in your contract than your mortgage rate will be higher and the property will be considered an investment property.


Aloha,
John S. Rabi, GM,PB,ABR,CRB,CM,FHS
888.819.9669
johnrabi@johnrabi.com
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
(This is what I think of the Kona Board of Realtors http://KonaBoardOfRealtors.info)

[Laughing_girl]

Please be wary of that tenant issue. We thought we were being nice with the existing tenant having 7 days after close to move out (Since timing may have been an issue.) - yes they did have 45 day notice to move.

We got the tenant from hell for over 9 days. And legally they did become our tenant. I had to send them certified letters about deposits in escrow (none), removing commercial weed operation, etc ... it was a nightmare. They took a bunch of fixtures and outlet covers that the seller had to replace at his cost but that was a negotiation after the fact when we could actually take possession.

I had to call Tom Yeh and thankfully he gave me advise with only an "I told you so", i.e. call him first, not after the fact. We had to call police... I could go on... just be careful of that tenant issue even if you think they aren't really yours.

[jdirgo]

John R. is absolutely right. There are specific short sale forms that need/must be included with the offer and in those forms, it needs to be very clear that NONE of the contingency dates begin until short sale approval comes from the bank. Once you have short sale approval (which can take months), then your inspection period begins, financing deadlines start, termite inspection/treatment dates kick in, etc.

Think of it this way, you don't want to pay for professional inspections or financing costs like appraisal until you have the short sale approval from the lender(s). Otherwise, you're just out the money if the lender doesn't approve and you will not get that money back.

John Dirgo, R, BIC, EcoBroker, ABR, e-PRO
Aloha Coast Realty, LLC
808-987-9243 cell
http://www.alohacoastrealty.com