Short Sale Listings:

Shopping for a Short Sale property is very similar to shopping for standard listings. Short Sales are generally listed with the local MLS and the Short Sale sellers are represented by a Broker. Short Sale listings may or may not have all the relevant information you need to make an informed decision and that is where an experienced Broker comes into the picture.

Either the listing agent or the selling agent should have sufficient experience with Short Sales. Preferably both. The listing Broker represent the seller, and the selling Broker represents the buyer.

Short Sale listings can be delivered the same way as standard listings. By email, by fax or other means of digital and traditional communication. Buyers not yet working with an agent can also shop for Short Sale listings using the many online resources available. Detailed information on Short Sales however will not be available, as most MLS's only show specific information to the public. Once a desirable Short Sale property is found, contact an experienced Short Sale Broker and request a showing.

Short Sale Offer/Counter Offer

An offer to buy, sometimes referred to as a Purchase and Sale or Earnest Money Agreement must be written. Items to consider when writing an offer on a Short Sale property are:

1) The Offer Price

2) Your Loan Type

3) The Sellers Loan Type

4) The Number of Seller Loans

5) Home Inspections

 

Short Sale Price: The listing price and the offer price are not one in the same, unless of course you want to make a full price offer. Short Sales require special attention when it comes to value. The price you ultimately offer a Short Sale seller may have little to do with the list price. In certain situations, where an unreasonable list price has been assigned to the property to purposely create a bidding war, you may need a market analysis of the subject property to make an informed decision. That analysis will help you decide where to start. Keep in mind, the seller's bank/lien holder/s will have either a BPO (Broker Price Opinion) or a full appraisal to determine the market value.

 

Buyer Loan Type: Your loan will also need to be congruent with the Short Sale home you are buying. As in any transaction, if lending guidelines are not in line with condition, location, or style of the home and property, the bank will not approve Your Loan for the purchase of a Short Sale property.

 

Short Sale Seller's Loan Type: It's is very important to have at least an understanding of the seller's loan type and whether the seller has a first and a second mortgage on the Short Sale property. FHA is the only entity that provides clear guidelines for Short Sale sellers through their PFS (Pre-Foreclosure Sale program). When a seller has an FHA loan and the offer price produces a net proceeds outside of their pre-determined limits, they will not accept your Short Sale offer.

It is imperative you use a Broker who will provide ALL the information available prior to writing an offer. You do not want to submit and offer on a Short Sale property only to find out 90 days later that the bank has rejected your offer because the price was too low. Many times the bank will make a counter offer that will reflect their bottom line regardless of the offer or list price, in which case you then have the opportunity to either accept it, or not.

A Short Sale seller who has a conventional loan will be at the mercy of the bank's discretion. There is no national Short Sale system in place to direct or instruct banks when considering Short Sales and all banks write their own guidelines for acceptance and or rejection.

 

Number of Seller Loans: Another very important item to be aware of is whether or not the seller has more than one loan. With all loans including those on Short Sale properties, the second loan is called a subordinate loan. Depending on the amount or loss, the subordinate mortgage company/lien holder normally takes the entire brunt of the loss. In some Short Sale transactions, the second loan may negotiate with the first loan/lien holder to help with that loss. Many times however, the first lien holder is in a great equity position and does not negotiate because they stand to gain more through foreclosure than they would by accepting the Short Sale.

 

Short Sale Home Inspections: Short Sales transaction typically allow the buyer to perform inspections. However, banks generally do not perform repairs. The standardized forms used by the Northwest Multiple Listing Service call for the inspection time period to begin upon receipt of written bank approval of the Short Sale however, many buyers perform their home inspection within days after mutual acceptance between buyer and seller. That way the buyer can rescind the offer (if the property fails an inspection) long before the bank even gets around to considering your Short Sale offer.