Tips on how to make process go smoother written by Steve Bergsman for Inman News
Lately, homebuyers are seeing more and more short-sale opportunities, but it seems as if fewer purchases are actually being completed. The perception in this case is correct. The short-sale process has become a nightmare: it goes on forever, sometimes never coming to a satisfactory conclusion even after months of effort.
All I can say is, “Hang in there, folks, help is on the way.”
According to industry sources, the playing field will soon begin to make more sense to buyers as servicers (the folks who actually handle your loan) will either move at-risk loans to special servicers that are experienced in this field and/or set parameters ahead of bids.
“There are going to be a lot more short sales coming into the system,” predicts Scott Thompson, a principal in Mortgage Resolution Services Inc. in Rancho Cordova, Calif. “Servicers have done a lousy job. They know it and are now looking to solve the problem.”
This is a necessity, Thompson adds, “as right now the queues are long and getting longer day by day.”
The short sale seems complicated — mostly because it takes so darn long to accomplish — but it’s not. The basic short sale happens when the proceeds from the sale of a property are less than the balance owed on the loan (secured by the property being sold). The key in all of this is the lender accepting a price that is less than the amount owed on the property — and the lender would do that to avoid a foreclosure situation, which can be a lengthy and sometimes costly process.
For buyers, a short sale is the chance to acquire a property at discount.
More often than not, however, the process has been gummed up. The numbers I hear are: just one to three out of 10 applications get accepted; and while the process can take as little as 45 days, it has been taking on average 90 to 120 days with some wayward dealings going on for nine months.
Here are some things that can be done to smooth the process:
1) Prequalify the listing agent. If the listing agent hasn’t even started getting from the seller the key documents — tax returns, bank statements, pay stubs, in short, the completion of the “hardship package” — then the property should not be listed because the agent is nowhere near ready to close a deal.
2) When a property is found, demand a commitment from the seller. In lots of areas, such as California, there is a provision in regulations that allows the seller to continue marketing the property during the short-sale process. However, your agent should have written into the contract that you are the primary buyer and any other offers that come in are backup offers.
3) Many lenders don’t look at a short sale unless there is a viable offer in hand. Every agent should have an arsenal of investor clients. If the agent representing the investors can’t bring them to the table, she can then go to her investor base and say, “Would you make a fair offer on this property? That allows us to start the foreclosure process. We will give you a 72-hour clause to perform and then substitute a higher offer in there.”
4) Broker price opinions are needed for sales, but since brokers doing the valuations are paid so little, they often do no more than a drive-by. However, if you can give the broker background on the property, list what repairs are needed and offer comparables, the valuation can be more accurate.
“The agent,” says Valasakos, “is the gatekeeper to getting the short sale accepted.”
Steve Bergsman is a freelance writer in Arizona and author of several books, including”After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade.”