Loading ...by Tony Pomykala, REALTOR, ePRO
Sunrise Investments
Sunrise Investments
Concerning Short Sales, some great information concerning them can be read at www.ShortSaleArizonaHomes.com in an article I wrote, based on our experiences dealing with them from a buyer’s agent perspective.
Short Sales are extremely frustrating, and tend to take a very long time to acquire. If you have a definitive timeframe in which you want to move here, Short Sales are probably not the answer. They can take anywhere from 3 months and longer, and often times no amount of “staying on top of it” can expedite the process. A short sale is a sale in which the seller owes more than the asking price/market value of the home. Not only must an agreement be made between the buyer and seller, but the lien holder must also agree to the sale, in writing, before the purchase contract can become executable. This is the part that requires the long wait. Banks are so far backed up with the glut of foreclosures, loan modifications, and short sale requests that it can take months for a definitive answer back from them. Many buyers have found something else by then, and simply walk away from/rescind the original offer.
The seller’s bank must receive a distress package from the seller (with a purchase offer) before the bank will begin consideration of allowing the sale to take place. Then at the bank, a Loss Mitigator must be assigned. They consider whether or not the seller is a candidate who meets the criteria for allowing a short sale to take place. If approved, then an appraisal or broker price opinion (BPO) must be ordered. The Loss Mitigator must then determine whether appropriate value is being received in the purchase offer. If it is deemed adequate, then the offer is presented internally within the bank and its investors. Then if approved, signatures must be obtained and the transaction can be executed. This might seem easy on the surface, but it is a lot of red tape and hoops to jump through from their perspective, going from desk to desk. It also makes it hard for us to track down where in the bank the offer is at, and who do we talk to keep it moving along. Now imagine if a counter-offer is involved….
Pricing of Short Sales: Because a short sale listing needs an offer before a bank will begin the process of approval, many Listing Agents of short sale properties tend to under-price the listing in an effort to get any offer they can. They’ve coached their seller to accept any reasonable offer, fully knowing that if the offer is too low, it will be rejected by the bank, thereby voiding the “acceptance” by the seller. Also, since Arizona is a non-deficiency state, even if the bank accepted the low offer the sellers often times would not be held to the difference (eligibility varies by circumstance). In many cases the seller simply sees the remaining balance of the mortgage “wiped away” without further indebtedness or taxability. Due to the nature of short sales, the sellers will not make any money on the sale of their home. They must make zero from the proceeds. Obviously however, the canceling of the debt is motivation enough.
In most cases, when seeing Short Sale listings in the property lists REALTORS send you, if the listing is:
“Active” it usually means no offers have been accepted yet on the property.
“AWC-Seller Written Instructions” (Active With Contingencies) usually means there is at least one offer on the property that has been accepted by the seller, and is being presented to the seller’s bank for consideration.
Remember though that in Short Sales these days, the majority of these offers fail or are rescinded, so if you don’t mind waiting many months should you find “the perfect house”, then placing a backup offer can place you in a position to assume the first position if that happens. Also remember that if you found a different home during the interim, you can rescind the offer and focus on the new home. It also isn’t a bad idea to have multiple offers out there until you finally get one of them accepted and executable. Then the others can be rescinded.
Of course, this is just a snapshot. Volumes more can be learned and observed on the topic, and the genre is still evolving as some banks learn to streamline their processes, while still others grow further behind and slower. One thing for certain though is that there is no such thing as an “easy” short sale, at least for now.
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