Shortsales? (short sales, real estate, foreclose)

[SpringMom3]

Someone fill me in on why they are a bad or good idea. We have plenty of time for the process since we are renting right now. But how long this "process" takes, I have no idea. Any advice would be great.

[MikePRU]

The short sale process has sped up a bit but not too long ago a short sale could take a year or more. Basically, the homeowner accepts your offer (which is lower than the remaining principal balance of their mortgage hence "short" sale) and then the offer goes to the bank for approval if they can figure out exactly who owns the mortgage. Part of why a short sale takes so long is because mortgages are often packaged up together and sold multiple times. If the house has multiple mortgages on it that just further complicates the matter.

Short sale properties do sell for less than what a similar property would sell for in a traditional sale because the buyer takes on additional risk and the timelines are often inconvenient. I've also heard of homes being damaged during the process either intentionally by the homeowner or by other parties who are looting the house for things like scrap metal.

[tights24]

Just to add a bit, some shortsales are listed by the homeowner without the mortgage holders knowledge as well. bottom line, the mortgage holder should/will have a BPO done on the house. this is a brokers opinion. This is pretty much an independent contractor taking a look at your house and determining its current fair market value. If that's in line with what the asking price is, you have a better chance of the deal going through quickly. The real estate agent also needs to be on his toes and constantly do trending for FMV just to make sure things haven't changed. The caveat is when a mortgage is still in the high 300's for example and the FMV is 220K. Mortgage companies don't like this big of a loss....... Just my opinion of course.

[MikePRU]

Originally Posted by tights24

Just to add a bit, some shortsales are listed by the homeowner without the mortgage holders knowledge as well. bottom line, the mortgage holder should/will have a BPO done on the house. this is a brokers opinion. This is pretty much an independent contractor taking a look at your house and determining its current fair market value. If that's in line with what the asking price is, you have a better chance of the deal going through quickly. The real estate agent also needs to be on his toes and constantly do trending for FMV just to make sure things haven't changed. The caveat is when a mortgage is still in the high 300's for example and the FMV is 220K. Mortgage companies don't like this big of a loss....... Just my opinion of course.

Good additional information. I would add one thing to your addition. Some short sales are pre-approved by the lender. These will move faster than unapproved short sales but there's usually less room for negotiation unless you want to go through the approval process again.

[Cape Cod Todd]

Good advice so far.
Short sales can be difficult and it depends on the bank as to how smoothly they progress but in the end you can own a house that you bought under the market value. When you take on buying a short sale house often there will be damage like missing items, holes kicked in walls etc... For most you can still do an inspection and if there is too much damage you can back out of the deal.
I did a short sale for a client near 3 years ago and it was a nightmare with bank of America. I swear they are banking on the failure of America. It is a long story but in the end and after jumping through many hoops for 6 months and the buyer spending money on inspections etc.. we had a closing date. The very next day after the bank gave us the date we could close they then told us they decided to foreclose instead.
I just started another short sale deal with Chase and so far they have been very helpful.
I think if you don't mind waiting a bit then a short sale may be a good idea for you.

[MikePRU]

Bank of America is the worst in every way. I don't know why anyone banks with them.

[SpringMom3]

thanks so much guys