Buying or Selling a Home/Question ab. Short Sale
I feel a little silly writing to a big-shot in Las Vegas about a small, inexpensive home, but it seems as though the other people who have written to you for advice really like you, and consider you very polite, so maybe you won't laugh at me TOO much..
I live in MS. (Are you laughing, yet?) I am trying to buy my first house, and am a little low on money, right now - just sort of starting out. I've tried to buy a couple of foreclosed homes, and I THINK that I did everything right, but the deals fell through. (My credit IS very good. The deals really 'fell apart,' I think, on the seller's side.)
Now, I have found one that I really like. It's $127,000 (believe it or not, in this area that will buy a nice house). This one, though, is not exactly a foreclosure - the woman is trying to do a 'short sale,' which I know nothing about.
About 6 weeks ago, I made an offer on the house, that expires in a day or two (Apr 15). The bank is Bank of America.
What I'm afraid is going to happen, is that they are not going to let her do the sale (I could and SHOULD have offered the full $127 - I ignorantly only offered $120,000 - because it's been on the market a while, with no offers).
Then (and I DO believe one of the previous 'foreclosures' that fell through, WAS in fact a short sale, instead), but, like IT, I'm afraid they're (Bank of America) going to deny her the short sale, and, like the other one, nothing at all will happen for months - and she might make a payment or two, or whatever, and nothing will EVER happen.
But I really like this house a lot, and hope that doesn't happen.
I'm sorry to make this so long (and really not say much), but I was just wondering if you could tell me if you might know of ANYTHING that I could do - I know I've waited until the very last minute, but do you happen to know of ANYTHING that I might could do (even writing or calling someone at the bank) - that might make my chance of getting this house ANY better?
I appreciate your time, and I'm sorry to bother you with this long question, over such a trivial matter - when I'm sure you deal mostly with 7 & 8 figure homes. I would very much appreciate, though, ANY advice that you might could give me. (I have a feeling there's not much that I can do).
Thank you very much,
PS - I had the home inspected by a good, reputable inspector, and he said that everything looked 'great' (the house is only 7-8 years old). He said that there were no foundation, or roofing, or any big-money problems, that he saw.. Thanks again.)
I am certainly no big shot, just someone addicted to work that has been selling real estate for a very long time. :) And we sell "condos to castles." Whether it's a $50k condo or a multi million dollar mansion, we try to treat all our clients with the same courtesy and respect they all deserve!
Anyway, short sales are not for the faint of heart. It used to be much worse, but these days it seems the banks are responding in some fashion within four months or so. (It used to take over a year and sometimes up to two years!) This is an overview of the process, so you understand what is happening behind the scenes:
1. You make your offer for the property and negotiate a sales price with the seller. Sellers are not allowed to profit in any way from a short sale transaction, so the seller really don’t care what he/she sells the home for. Surprisingly enough, Bank of America doesn’t care either. They are only the servicing bank which merely collects the appropriate documents and presents the entire file to an investor who is actually holding the note and is owed the money. So the investor is the only one who cares how much the sales price is. And each note has a different investor. Literally, you could have two identical homes with two identical cash offers being serviced by the same bank, and yet one will get approved and the other will not. It is entirely up to the investor holding the note how much, if any, loss they are willing to take.
2. The seller's hardship package is put together and sent to the bank's short sale (loss mitigation) department along with the purchase agreement. This includes all the seller's recent financial information including pay check stubs, bank statements, tax returns, a letter about why they can't make their payments anymore, etc. Often the sellers are not too speedy in getting this all together - remember, they are not getting a dime out of the transaction, and it quickly becomes a pain in the you know what to them. (Often the seller will end up "checking out" of the process because they don't see a benefit in it for them.) Once collected, this package has to be input into the bank's system for review.
3. Once the package has been reviewed for completeness (not approved, just making sure everything is in there) the bank will order an appraisal done. This is called the BPO or Broker's Price Opinion. That can also take a number of weeks to obtain.
4. Once the BPO is back, the bank will request updated financials from the seller. (Again this takes more time.) Then the seller's hardship package, the purchase contract and the BPO are bundled up and sent to the investor for the final say. (Remember that Bank of America is NOT the one that approves the sales price.)
5. Now comes the fun part. It depends on who the investor is on how long it will take to get an answer! Investors can be anything from a huge insurance corporation that bought real estate notes as part of their portfolio to individuals like you and me. If it is a huge corporation, now the file has to make its way through their system as well, and a number of people have to sign off on it. No one can tell you if this part of the process will take days or months.
From all of the above, you can see why this process takes so long. Most short sales actually fail because the buyer gets tired of waiting!!
The good news: the investor will almost always come back with a figure the investor is willing to accept, so don't worry about only offering $120k. The investor will "counter offer" your offer if they don't like the purchase price.
The bad news: no one knows what that figure might be - it could be over the listed price of the property, depending on how the BPO comes in. Again, it is all up to the investor on what kind of a loss that particular investor is willing to take. And you, of course, can always walk away if you don't like the investor's final figure.
One thing you do want to check on right away: Did the seller have a true hardship that is forcing this short sale? Divorce, job loss, sickness? What was the reason the seller could no longer make their payment? As long as there was a true hardship, if you hang in there chances are VERY GOOD that you will be given an opportunity to buy this home (though again, you may or may not like the amount the investor wants for it.)
If there is a true hardship, 95% of the time the investor will cut their losses and approve a figure they will accept.
But even if the seller did NOT have a true hardship, their short sale may still be approved! I have seen millionaires get approved for a short sale when they were dumping a home because it was upside down. But that call is totally up to the investor. It is not as much of a sure thing as a true hardship. Knowing if this sale is a true hardship or not may influence your decision to stay in this transaction for a longer period of time.
I hope I haven't confused you too much with my long rambling explanation! Short sales are tricky, and take infinite patience. Again, most short sales fail because the buyer loses interest and decides to walk. There is nothing you can do to speed up the process - just be ready to move if the bank comes back with a response. They usually only give 30 days to close once the investor gives you a figure, even though you might have waited six months on them to get it to you!
Best of luck, Mike!! And sorry it took me so long to write a response. I seem to have caught a bit of the flu, so I am slow getting started today.