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DOING SHORT SALES |
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MASTERING SHORT SALES |
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How to Succeed at Short
Sales
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What and how should I disclose about the
short-sale property to prospective buyers?
Opinions vary on this topic, although most experts favor disclosing that a
property is a short sale in the comments section of the MLS listing. Others
suggest waiting to disclose the need for lender approval of the sale until a
buyer is ready to make an offer. Debra Allen, ABR®, e-Pro®, with Prudential
Arizona Properties, Gilbert, Ariz., uses a disclosure form prepared by her
brokerage just for short sales. She also had a special sign rider for the
yard sign made indicating a property is a short sale.
Tip: Watch
out for unethical investors who will try to convice an owner facing
foreclosure to sign a quit-claim deed for the property, and then lease the
property, warns Jim Cacioppo, broker/owner of Grand Realty Group. Grayslake,
Ill. In such cases, the former owners will still be liable for the mortgage
payments, even though they no longer own the house.
How long does it take to complete a short
sale?
Although response times vary from lender to lender, it can take two weeks or
as long as 60 days to receive an approval of a short sale from a lender.
That’s why it’s critical that buyers and their representative understand and
accept that time frame before they make an offer.
An addendum to the California Association of REALTORS® purchase contract
includes a provision allowing either party to cancel a short-sale contract
within a set period if the seller hasn’t gotten the deal approved, says
White. Properties with securitized loans (which are the majority these days)
may require a longer time to get an approval of a short sale because of the
possible need for approval from the entity holding the pool of securities,
says Churchill.
Tip: Keep in
mind that the purchase contract on a short-sale property is a legally
binding agreement once the earnest money has been deposited. Without
language in the contract stating that the lenders must approve the offer and
release all liens on the property, the seller may face a legal problem for
failing to execute the contract if the short sale is not approved, says
Hollingsworth.
What can the seller and I do to make a short
sale more attractive to a lender?
Getting a lender to approve a short sale is primarily a question of
economics. You have to provide hard numbers to show that the amount of money
a bank will realize on the short sale is better than the amount it may
recoup from foreclosing on the property and selling the property as an REO,
says Todd Ruckle, ABR, RE/MAX Associates Inc., Newark, Del.
A 2002 study by Craig Focardi of the Tower Group estimated that the entire
cost of a foreclosure was $58,759 and took 18 months. Other factors that can
influence a bank’s decision include the liability risk it assumes by owning
the property after foreclosures, the money tied up during the holding period
for a foreclosure and REO resale, additional costs associated with an REO
such as attorneys’ fees, and the additional reserves it will need if REOs
rise in the bank’s portfolio.
Tip:
A buyer that is willing to close in 30 days and who can make a substantial
down payment may make the deal more attractive than a buyer who wants 95
percent financing, notes Michael Termine, GRI, CRB, associate broker,
Prudential Rand Realty, New York City. All buyers should be preapproved for
a mortgage before submitting the offer.
However, to avoid unnecessary costs, buyers should wait on having a home
inspection and an appraisal for the loan until after the bank has accepted
the short sale proposition, say Cole-Murphy. Genuine hardship, such as a
lost job or high medical bills from an illness may also have an influence,
says Covello. |
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