Short Sales

Tucson Real Estate is changing and there are many opportunites to purchase Tucson Short Sales, Foreclosures, Bank Owned and REO Properties.

What is an Short Sale?

Short Sales occur when borrowers sell their properties for amounts that are less than the amounts owed to the lender. When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. A short sale is usually executed to prevent a home foreclosure. However, a lender may consider a short sale if the value of the property has fallen, the owner now owes more than the property is worth and a short sale is predicated as the most economic way for the bank to recover the amount owed on the property. A short sale is typically faster and less expensive than a foreclosure.

Short Sale - Q & A

Q. What qualifies a home for a short sale?

The seller's mortgage lender will be considering many factors in deciding whether to approve a short sale, including:
* Whether the seller is deserving of a break, due to financial hardship caused by unforeseen circumstances such as layoffs, divorce or illness
* Whether it would be cheaper to simply repossess the house, make any necessary repairs and sell it through a real estate agent
* How many other properties the mortgage lender currently has in default
* Whether there are co-signors who can be held responsible for the balance owed on the mortgage

Q. How do I buy a short sale?

First, find a good real estate agent who is experienced with Short Sales. When you find a short sale property you want to make an offer on your agent should insert language into the contract that states the contract is "Subject to seller's mortgage holders' approval". the contract that states the contract is "Subject to seller's mortgage holders' approval". Often, lenders require Short Sale properties to be sold in "as is" condition, thus not threaten a potential closing with repair items.

The Seller may counter your offer. Remember, the contract is between you and the Seller, not you and the Seller's lender. The Seller does not want to submit an offer to the bank knowing it will likely be rejected and/or counter-offered because it is too low or has too many closing costs on the Seller's side. The lender wants to mitigate the loss as much as possible.

After the contract is signed and agreed to by both you and the Seller, it will be sent to the Seller's lender, or lenders if there is more than one mortgage holder. The Seller's lender will then order an independent appraisal and/or Broker Price Opinion (BPO) of the subject property.

The Seller' lender will counteroffer your offer with the appraised value. You can accept or counteroffer this amount however your offer may ultimately be rejected if it is not at least 83% of the appraised value. This varies by lender. The lender makes it decision on price based on the requirements of the end-investor on the mortgage and PMI compan. Your offer must satisfy all lender's requirements.

After final approval by the lender, a "demand" or "approval" letter is sent out to the Seller. The letter will normally stipulate that closing must occur by the date stated in the contract, or there will be a per diem penalty for not closing on time. Thus, you are expected to have your mortgage, insurance and inspections completed in a timely manner.

The lender will expect to see a copy of the settlement statement at least two days prior to closing to ensure it is accurate, and matches what was stated in the net sheet that was submitted with the offer and on the approval letter.

Q. What are the risks of buying a short sale?

In a conventional home sale, the buyer usually needs only the seller's acceptance in order to go forward with a transaction. However, in a short sale, the lender's approval is also needed in order for the sale to close.

Before getting serious, find out the amount of the loans that must be paid off to close the sale. If the loan amounts total more than the sellers' asking price, then you will either need to pay more, or the seller's lenders will need to agree to accept less than they're owed.

Q. What is required from the property owner?

The property owner must:
* Sign a listing agreement with the Realtor
* List the property for sale
* Cooperate with access, showings, offers, and with the Realtor and SSW.
* Vacate the home following close of title
* Agree not to finance or otherwise encumber the property
* Be responsible to maintain the home in "show" condition
* Be responsible for minor repairs to the home
* Be a responsible homeowner until close of title and vacancy of home.

Q. 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 90 days to receive an approval of a short sale from a lender. This is because lenders have an overwhelming number of sellers asking for Short Sales. That’s why it’s critical that buyers and their representative understand and accept that time frame before they make an offer.

Q. How do I know if the lender will accept my offer?

The lender makes it decision based on the requirements of the end-investor on the mortgage regarding price. For example, even though the "lender" may be Bank of America, the actual investor reaping interest may be the Bank of New York or Merrill Lynch. There may also be PMI or private mortgage insurance on the loan. In that case, the PMI company will also order a separate appraisal or BPO. Your offer must satisfy both lender's requirements. If there is a second mortgage on the property, the first mortgage holder will offer the second mortgage holder a dollar amount as a "buy out".

Additionally, the lender(s) may ask the Seller for a cash contribution or promissory note. If the Seller cannot comply, you may be asked for additional monies to make up some of the difference. If the property is a good deal, you may wish to do so.

If you have patience, persistence, and a knack for problem-solving, buying a short sale could be for you.

Search for Short Sales