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Up front - I want to double check what my realtor is telling me and yes, I will also be speaking to my RE lawyer tomorrow too. Just want some background info and a better feel for a situation.
House is 150 years old and was renovated in the late '80s. Came up listed as a short sale at quite a bit less than earlier failed listing prices. We had some interest with a few reservations as the sellers agent "didn't have" the disclosures and surveys. Seller was looking for "last and best" so we made an offer.
According to our realtor, to qualify for a short sale, the sellers need to prepare a financial package and present it to the bank for approval. After bank approval, it goes to market. It turns out that the sellers have not done this, the bids were put out (to show the bank the market rate?). Realtor now says this happens sometimes (would have been nice to know in advance).
Anyway, the sellers picked our bid, signed the contract and insisted on going into attorney review immediately, which I found strange as they still don't even know IF they can sell the house at the price they accepted. Eventually they handed over the site plan and lead disclosure (marked "don't know") but nothing else.
My concern is that I feel herded to buy a property about which I know absolutely nothing and may end up spending money on surveys, lead tests and inspections on a house that the sellers may not even be allowed to sell at the price they accepted. How do I build in contingencies? If I go through AR and into contract, should I be inspecting the property immediately? Does the 10 day lead test rule apply? Will I be locked in and at the mercy of the seller and the sellers bank for a long time? What if we go under contract, everything grinds to a halt and i find something I would prefer? Who would I even negotiate with if we find extra issues with the house (it is 150 years old after all) outside of the obvious updates it needs (furnace, windows etc.)
Yes, there is always a risk, but I prefer to at least mitigate the risk as much as possible with some smart choices and protecting myself contractually.
Appreciate any insight into this process. I picked an agent with experience and Short Sale certs but this added a wrinkle she hadn't seen before.
That doesn't sound right. My understanding was the bank had to approve the deal before it went forward. But I'm sure one of the RE agents will answer soon. You could also try and post this on the real estate forum.
The bank first has to accept your offer, and be willing to work with your offer as well as any changes to or contingencies added to the contract by your lawyer.
The sellers sound about as knowledgable about the process as I was a few weeks ago = clueless.
First off, this all sounds fishy. When a person goes in to short sale, it's usually the end of it, and the bank is who you are dealing with. Sounds like they are still mingling to either raise some cash or prolong turning over the house to the mortgage company. Your RE attorney should help you draft contigencies, particularly with regard to inspection/home assessment criteria. If you are looking for a mortgage, you may want to ask a rep. from the mortgage company what the contract should look like.
It may be worth spending the extra up front to make sure you have title search, all the leins on the property have been settled (do they owe for any last minute "improvements" etc.).
You cannot submit a short sale package to the lender without a signed contract. Your agent should have explained all this to you. There is a waiting period for the negotiator to be assigned, then a BPO is ordered and then, if the lender feels that this is a good candidate for short sale, there may be additional requests by the lender before submitted to Fannie mae for final approval. You do your attorney review and your inspections within the specified timeframe. The listing broker should have made certain that you are capable of waiting without knowing what the outcome will be. If you are in a hurry, or if you need a place to move to by a specific date, this may not be for you. Good Luck.
You cannot submit a short sale package to the lender without a signed contract. Your agent should have explained all this to you. There is a waiting period for the negotiator to be assigned, then a BPO is ordered and then, if the lender feels that this is a good candidate for short sale, there may be additional requests by the lender before submitted to Fannie mae for final approval. You do your attorney review and your inspections within the specified timeframe. The listing broker should have made certain that you are capable of waiting without knowing what the outcome will be. If you are in a hurry, or if you need a place to move to by a specific date, this may not be for you. Good Luck.
Thank you for the response. I don't need to move by a certain date, have no sale contingencies and the price is well within my limit so the wait and price are not an issue for me. More of an issue is being locked "under contract" for a period of time when I may prefer some flexibility. House is fine but not a "must have".
Some questions -
What is a BPO?
What kind of requests can be made by the lender?
What if the seller is not eligible for a short sale (there is some question that they may have additional assets and therefore not be eligible. They bought another house out of state).
Attorney review should be immediate, as in a regular sale? Inspections when? Should I be inspecting even before the bank approves?
Who would I negotiate with if the inspections come up with major issues?
You cannot submit a short sale package to the lender without a signed contract.
Isn't an offer a signed contract?
Do you enter into AR with the seller or the lender in the case of a SS?
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Your agent should have explained all this to you. There is a waiting period for the negotiator to be assigned, then a BPO is ordered and then, if the lender feels that this is a good candidate for short sale, there may be additional requests by the lender before submitted to Fannie mae for final approval.
Why would Fannie Mae be involved if the original mortgage wasn't a federally $$ backed mortgage?
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You do your attorney review and your inspections within the specified timeframe.
What specified time frame? Isn't that all contingent on what the RE Lawyers add to the contract AFTER the offer is accepted? I've had weeks of back and forth between my lawyer and a seller's lawyer. Attorney Review isn't over until it's over. Is it different in the case of a SS? I don't know. The closest I've come to buying a short sale was buying a property in bankruptcy. Had to deal with the court appointed trustee - and that took forever.
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The listing broker should have made certain that you are capable of waiting without knowing what the outcome will be. If you are in a hurry, or if you need a place to move to by a specific date, this may not be for you. Good Luck.
According to my broker, things are moving more quickly in NJ, when it comes to SS's, than even 5 months ago. Banks aren't playing the same game of hardball they have been in the past. Inventory is building up.
You cannot submit a short sale package to the lender without a signed contract. Your agent should have explained all this to you. There is a waiting period for the negotiator to be assigned, then a BPO is ordered and then, if the lender feels that this is a good candidate for short sale, there may be additional requests by the lender before submitted to Fannie mae for final approval. You do your attorney review and your inspections within the specified timeframe. The listing broker should have made certain that you are capable of waiting without knowing what the outcome will be. If you are in a hurry, or if you need a place to move to by a specific date, this may not be for you. Good Luck.
Are you saying to do the inspection before getting bank approval?
Not sure if the REA is required to set foot on the property before setting a price, or just runs comps and comes up with an average. From what I've seen, when it come to SS listings, 99% are listed at FMV when you couldn't get a CO without spending a few grand, let alone spending 10's of thousands to remediate the state of disrepair the property is in.
But that's just the market I'm looking in : multi and single family homes around RU, and only in the areas students will rent. Go one block off in the wrong direction and you have to hang either a red or blue bandanna off your front porch. Or get a gun permit to carry concealed.
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What kind of requests can be made by the lender?
Can you increase your offer? Would you be willing to not reduce your offer but let us put that "projected cost" of repair into an escrow account, so when you dig up that septic system or oil tank, and it's not as bad as your inspections show, we can dole out the money when you prove what you spent with receipts?
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What if the seller is not eligible for a short sale (there is some question that they may have additional assets and therefore not be eligible. They bought another house out of state).
Then they won't qualify for a SS and you'll have to wait and see if the house ends up on the auction block, and if someone buys it at auction, or it ends up REO'd.
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Attorney review should be immediate, as in a regular sale?
When both parties enter in to AR - there is no specified time that AR takes, that I am aware of. Unless, and I've BTDT, you don't hear back from the "other side" for days or weeks on end, and your RE Attorney draws up a letter that has something to do about responding in a "timely fashion".
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Inspections when? Should I be inspecting even before the bank approves?
No. Think non-short sale - you don't pay to have inspections performed on a property before the seller accepts your offer.
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Who would I negotiate with if the inspections come up with major issues?
The bank/lender. The seller only approved your offer to submit to the bank/lender. The bank/lender has to accept it.
Last edited by Informed Info; 06-21-2011 at 10:32 PM..
During AR he can write in specifics, so that after AR they have e.g. 90 days to get bank approval. He would write in the contract that no inspections would take place until approval and that no other deposit would be put down outside of minimal earnest money without approval either. After the approval it would move like a normal sale, inspections etc.
Issues would be:
After AR, we would be legally obligated and Under Contract until the approval came through. This may be a deal killer for us as I don't really like legal obligations without much definition. Approval might not even happen either so I may be tied to a house I might eventually not be able to buy at all!
If the inspections come back with issues the bank might not care and probably won't negotiate at which point I can walk but of course I will have burned through a lot of time for nothing.
Banks sometimes insist on a fast close but of course this can be slowed down via the contract so that there is time to lock in mortgage.
With the wait, mortgage rate will change so my accounting will come out slightly differently and there is an issue of risk there too.
He also said that if it is BofA it's hardly worth the bother as they are an absolute nightmare.
If it all falls through house could still end up in foreclosure anyway.
Attorneys warning - short sales are a PIA.
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