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I'm starting to search for a new home as a principal residence. I want to buy something under market value because 1) it works better for my budget, and 2) to protect myself against further market declines.
I read a book on short sales and foreclosures from the library, and it said that the best opportunity for getting a below market price is to buy a short sale from a seller before the property is listed by an agent and has attracted a lot of attention and competitive offers.
This makes sense, as we are looking in a fairly competitive market with a budget of about 800k, and the demand for the type of home we are looking for could be significant. My question is, is this feasible? Has anyone had any experience in doing this?
The book basically recommends getting in touch with home owners that have received a notice of default. It sounds very difficult and touchy, but if they are headed to foreclosure, maybe it could work out as a win-win situation?
Any experience in this arena or advice would be great. Thanks!
I'm starting to search for a new home as a principal residence. I want to buy something under market value because 1) it works better for my budget, and 2) to protect myself against further market declines.
You and million of other buyers want this. It's not rocket science and you don't need to reach a book to figure out that buying something (doesn't matter stock/property below market value is the best option.
It's worth a shot to contact the distressed seller. But (depending on what state you are).
I live in Florida. It's pretty public knowledge who's currently behind on their mortgage because you can easily look up properties on county webpages.
The issue with short sells are:
1. Many homeowners (especially ones with school kids will just ride out the short sell/foreclosure) time frame and aren't' interested in putting their home on the market until it's time
2. Some in distress are still looking at a loan modification.
3. You have to find out if there's PMI on the loan. Some homes cannot be saved with a short sell because the 2nd lien holders don't care to negotiate because they get paid no matter if the home goes into foreclosure.
4. And the tricky thing is many banks will want homeowners to carry a balance even if they short sold.
So contacting a homeowner randomly may just be a shot in the dark. You don't know if the homeowner is even interested in selling at this point.
Unfortunately the book you read (good thing you didn't pay for it), it just crap.
Thanks for taking the time to respond. I wasn't under the impression that the book was rocket science or an original idea. I merely wanted to educate myself on the proceedings of short sales and foreclosures, and it points out that the best deals exist when you aren't in competition with all of the other buyers looking for a short sale.
I am really just looking for additional perspective and experience from those who have tried to go this route, and have failed or succeeded.
A property has to be listed on the market before a lender will look at your lender. Part of the paperwork your realtor must provide to the lender is proof the property has been listed (Copy of MLS Listing).
A property has to be listed on the market before a lender will look at your lender. Part of the paperwork your realtor must provide to the lender is proof the property has been listed (Copy of MLS Listing).
This is absolutely not true. One can offer to purchase an unlisted property, and if the seller agrees to sell, a contract for the sale can be written. I have helped several buyer clients do exactly this. A lender will want to see the contract, and will conduct an appraisal to determine the value of the property. An MLS listing will be reviewed if it exists, but is in no way a requirement for loan approval.
This is absolutely not true. One can offer to purchase an unlisted property, and if the seller agrees to sell, a contract for the sale can be written. I have helped several buyer clients do exactly this. A lender will want to see the contract, and will conduct an appraisal to determine the value of the property. An MLS listing will be reviewed if it exists, but is in no way a requirement for loan approval.
I work for a major lender as a loss mitigation specialist. We will not consider a short sale unless the house has been listed on the market. I can't say this rule applies to all lenders but it certainly does with major ones.
A property has to be listed on the market before a lender will look at your lender. Part of the paperwork your realtor must provide to the lender is proof the property has been listed (Copy of MLS Listing).
That has been my experience as well. There may be some banks who will look at a short sale offer on an unlisted property, but not most. I think all of the short sales we have processed have required the property to be listed in MLS as a condition of considering the short sale, unless the first is getting paid in full. If only the 2nd is taking a short, they usually don't care, in my experience, since they are usually getting more than they would on a normal short sale. We've had two of those, and one wasn't listed.
I don't think you can even enter an offer into the equator.com system on an unlisted property, and several of the biggest lenders use that system for their short sales (Wells Fargo, Bank of America, and Nationstar, along with a couple I'm not familiar with)
I work for a major lender as a loss mitigation specialist. We will not consider a short sale unless the house has been listed on the market. I can't say this rule applies to all lenders but it certainly does with major ones.
I think I may have misunderstood your initial post. I was looking at this from the perspective of the buyer, and thought you were asserting that the buyers lender would only lend the purchase money if the house was listed on an MLS.
Sellers lenders, when considering whether to approve a short sale, want to be sure that it's an arms length transaction, and the best way to do that is to have the property listed in the MLS, so I can see the reason for such a requirement.
...I read a book on short sales and foreclosures from the library, and it said that the best opportunity for getting a below market price is to buy a short sale from a seller before the property is listed by an agent and has attracted a lot of attention and competitive offers. ...
I agree with previous posts that it is highly unlikely that you will find a short sale that is not listed as this is normally a requirement of the seller's bank.
You could work with an agent to set up email notifications for new short sale listings so you can try to be first in line with an offer.
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