If your looking to buy a short sale Home for Sale in the Salt Lake area. If your a buyer in the market to get a great deal on a home in Salt Lake then buying a short sale listing will appeal to you. and you want the best deal possible you need to know the players, their rolls and the fact involved in a short sale transaction. Let’s go over the process of short sale. It simply a seller putting their home for sale for less than the amount owed on the home. So to close the sale, the bank or in most cases the banks will need to approve the lower amount they will receive. If there are other debts the seller owes on the home like water or home owners dues and judgments on the seller in Utah all judgments attach to real property as a lien they need paid. So if the seller owes a judgment of $50,000 to IHC hospital or a doctor you’re pretty much done, because it is really hard to get them to accept less or just release the lien. These are wiped out in a foreclosure like a 2nd mortgage. In reality how this looks is you have a home with a $236,000 mortgage taken out in 2005 it’s balance now with 5 month of non-payment and legal fees is $253,000 you have a 2nd taken out at the same time in a 80% first 20% 2nd of $59,000 now owning $64,000. If you have any Judgments in Utah it the equivalent of having a lien on the home, your pretty much done at this point unless the seller will settle them prior to listing the home. So let’s say he has collection but no liens. Judgment means the court has said he owes them; collection is just the company attempting to collect debt.
Now we do a pricing evaluation based on the active and under contract and sold comps. Let’s say the home is in Draper on South Mountain and it is worth 70% of what it once appraised for it’s worth $206,500 now. That is what the bank should Broker Price Opinion the property at. With that # it’s probably a town home so that makes it harder to sell, less buyers in that market. What will the bank really take on the purchase? We’ll there are no written rules and lot of factors come into play but in this scenario which is common because most homes were 80 /20 loans since 2003 you won’t have mortgage insurance. That is a good thing for short sales because it’s one less approval and the mortgage insurance companies are not approving much. They would rather delay the payoff and move closer to a recovery and make the bank take the home back and sell it before they have to payout. Hoping the housing will increase in the 6 to 12 months it takes the bank to do that. With no MI Company to deal with. What happens, we’ll the seller has to qualify for a short sale and must submit a qualifying package of financials, bank statement paystubs, a hardship letter and copies of taxes for 2 years. So if they have a legitimate hardship, they can’t afford it because of loss of job change of job or have t relocate to another city and are not just trying to get out of the home because it has dropped 30%, they should get approved. Now the bank takes a look at the net of the sale and after they get there BPO decided if it will work. The 2nd is pretty much along for the ride at this point because if the first forecloses they get wiped out. They will huff and puff but will accept one of the following if it’s less than $50,000 they will take $1,000 or if it’s behind a FHA or VA loan that is all they can get. If it’s over $50,000 to $100,000 they will get $3,000. If it over $100,000 they will get 5% up to a max of $10,000. It 2nd will also ask for a promissory note in some situations. That is up to the seller in the end and with a skilled agent most 2nd will agree little or no note. Most agents have little to no skill on short sales and don’t know how to get this done if your worried about a home equity line become an automatic unsecured not get a professional to negotiate it. If you hear the 2nd won’t accept the payoff have them call me I’ll help you for a reasonable fee.
What # will the first accept and what about the MI insurance. The BPO is in at $206,000 the 1st wants to net 82% some will go less no less than 80% if the property is in a really tough market like 10 +month of inventory. See pricing article. You can add the 5% commission to that and make your offer at 85% of $206,000 or $175,000 add your closing cost paid by seller to that, would be the lowest a conventional loan would take. The first will take all proceeds less closing fees, seller paid closing costs, fees back HOA dues, and $1,000 for the 2nd and it should go. FHA and VA have a whole procedure that included their HUD form be submitted to the lender and that starts an automatic 90 day stays of the foreclosure and you can get an automatic 60 days extension of the foreclosure for marketing and approval of the short sale. FHA has an 82% net after commission so 87% plus your $1,000 for the second and any home owner, you’re probably close to 89% gross. That tough until you look at VA it’s 88% net so you’re selling for 95% it probably not going to happen. So unfortunately with a VA loan the seller will probably get a foreclosure. If the lender doesn’t follow the rules set up by HUD they don’t get paid back there insurance money from HUD; that isn’t going to happen. If an MI Company is involved and a lot of companies purchased self MI on the self insured 90% + loans you will be lucky to get under 85% no matter what the circumstances with a conventional loan. How long will it take depending on the lender the skill of the agents and the bank countrywide takes the longest. If it’s me I get about 75% done in 45 days from the accepted offer some that up to 90 days. Most agents 90 days to 180 days on average they close 75% of their short sale. I close 100% of eligible short sale that follow my directions and the seller cooperates. I have never not closed one that the seller cooperates. Some sellers have quit and won’t give me updated info in the middle because they are filing a bankruptcy and don’t care. If they want to complete a short sale 100% of mine close.
Now you are armed with the # how do you find and put one of these home under a binding contract. We’ll that is where you can go it alone, call listing agent and try to put one under contract. Ti can be frustrating and you may be taken advantage of in most cases by listing agent. I’m an expert agent in regards to short sale and agent try to run reindeer games on me!!!!!! I cringe when I think of a buyer out there trying to talk to them on their own. So let me explain a few mandatory things you have to be able to do. You have to do them that will protect you and not waste your time. First off get an expert Short sale buyer’s agent like me and you won’t have to worry about it. This isn’t a pitch, I am only committed that you get the best home at the best price with the least frustration. I will get myself authorized to talk to the bank and be able to expedite this thing through. This will cost you nothing. I will not let the listing agent, double speak, and not represent your rights in the contract without being held accountable. I will give you the real truth of the purchase. If you want to go it alone or with someone else here is what you have to do to be in a contract with a short sale.
- Use only the new binding contract Utah Association of Realtor Short sale Addendum. It says only one contract will be accepted and sent to the bank and all other will be back up offer only. Do not allow any alteration of the addendum like other offers can be sent to the bank. With this addendum you have rights as a buyer to have your offer looked at and evaluated and answered before any other offer is sent in.
-
You have to ask the selling agent before you go to look at the property do you have an offer that has been sent to the bank. If they say yes start walking with one exception. If they won’t accept the UAR short ales addendum (2nd addition binding contract). The first UAR addendum was a non-binding agreement the sell could do whatever they wanted and accept other offer. Make sure it’s the current addendum the old one is removed for use by the URA and they own the copyright. The bottom line is will they put it under contract with that addendum binding you as the buyer and the only contract sent to the bank or not!
- If the answer is no walk away. In Utah you can only have 1 offer accepted on a property any agent that accept 2 doesn’t have a clue. Only acceptation is if the offer is accepted with a time clause, like a first right of refusal, stating the 1st offer has 24 hours to match or with draw their offer when the seller accept a more desirable offer. You can accept a 2nd offer subject to the time clause on the first. These are all standard addendums. You can’t accept 10 offer send them to the bank and let it chose. Worse off you can’t accept 3 offers and send one to the bank and wait on the other 2. Or just not communicate on the offers, which is what we are seeing is listing agent having buyers sign a 6 month exclusive buyers agency agreement to be able to make an offer on their listing that has an offer, at the bank that is exclusively being worked on by the agent. All other are back up and aren’t even counter offered as such. By law the agent would have to tell you if you directly ask them about any pertinent fact of the home. An accepted offer is a pertinent fact. Most don’t even know that tidbit, that all pertinent facts have to be disclosed and an accepted offer is a pertinent fact. They just say when the bank gets back to us we’ll call you. That is so disgusting and they shouldn’t be allowed to be Realtors or member of the board or the association.
- Never, Never, Never sign an Exclusive Buyers Agency Agreement with a short sale listing agent or any other listing agent to make an offer on their listing. Only use the non-exclusive agreement you can’t just cross off the top and initial you need the form because they have different wording in the agreement. You sign an Exclusive Buyer Agency agreement because you want to hire an agent as you exclusive agent to find you the home you are buying over the time frame of the contract. Some agents are worth it and give you extreme value like me. I give you a cash rebate of my commission; I give you flawless advice and explain everything about buying not just what you need to know. I have one goal you owning a great home and being thrilled by the entire process and my work in helping accomplish that.
- Ask direct questions and if the agent says I don’t have to tell you, site chapter and verse you have to tell me or any perspective buyer any pertinent fact like having an accepted offer, will you represent me and use the URA addendum? Of course they don’t have to tell you the price just that there is one. It they don’t want to do a non-exclusive agreement give me a call I’ll do it all day long.
- Ask how many short sales the agent negotiating and completed successfully, if it is not at least 4 in the last 6 months ask for it to be done by an expert.
- Know what the home is worth before you make and offer have a active, under contract and sold price evaluation done see pricing your home and work your number form there so you will be within and acceptable range. I would probably not advise a seller to accept an offer below the range a bank would accept unless the property had been on the market for some time without offers.
- Don’t try to buy with an FHA loan unless it’s an FHA203k loan on homes that may need repairs unless you’re willing to pay for them. Sellers of short sale usually don’t do repairs that cost money that why they are in a short sale situation.
- Never pay a negotiator fee out of seller paid closing cost to buyer. They try to get the seller to pay $2,500 in buyers closing cost for the negotiation and use that as extra profit for the listing agent. If the listing agent can’t do the job have them pay for it. It’s OK to ask for 3% for your real closing cost they will pay that.
- Most importantly look at recently listed short sale that doesn’t have offers on them. This will make it easier in finding one your can buy.
If you looking to buy a short sale out of the homes for sale in Salt Lake and have it qualify you for the $8,000 tax credit you must be closed by November 31. You need to be under contract with an expert now to make sure that happens. There will be a lot of offers in the next couple of months. Give me a call and let’s talk about getting you into a short sale. Look at the new short sales updated every 48 hours.
Recent Comments