A short sale is a transaction in which the lender, or lenders, agrees to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt. Yes even after your transaction is done unless it is specified in writing as part of the contract a lender can pursue you years later for the balance of the loan.
Why is the number of short sales rising?
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses. The cost of running the home including mortgage, taxes, utilities, upkeep etc are still squarely on the shoulders of the homeowner. In a foreclosure the lender will be responsible for those after the foreclosure is finalized.
A short sale can also be the best option for homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially. Check with a lender to see the ramifications of a short sale on your credit report.
What challenges have short sales presented for REALTORS®?
Absence of a uniform process and application
Currently, both short-sales documents and processes are lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions. In other words there is not a standard process to follow. Each lender is requiring different forms and basically has their own rules on the transaction. Standard practices in the transaction are superseded by the lenders insistence on final say on all aspects of the contract. In a normal transaction you get an answer to your contract in a day or two. Once the lender takes over the procedure it could take months to get the transaction offer answered. There is usually a clause in the contract specifying that the buyer or seller can walk away from the deal with no penalties after a specified date like say a month after the contract is submitted but you are still tied up in a transaction for that time.
The buyer is usually responsible for all repairs including Township violations. Think of it like an auction where you are buying the home “as is”. We have even seen instances where the lender wants to renegotiate the commissions or make the buyer pay the realtor commission for their agent which is normally paid by the seller. You are still entitled to your inspection though and can specify you can walk away if you do not like the results. It must be stated in your contract that you are taking the inspection option allowing you to do that.
Multiple lenders
When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
So the bottom line is yes you can get a deal on a home because normally the price is lower than the norm. You have to be prepared for the transaction to take much longer than a normal one. You have to have your inspections to see what all the repairs will cost. The township does not normally do their inspection until alter all the papers are signed by both parties so you could be surprised by another set of repairs prior to settlement. As a buyer you may be responsible for paying some or all of the buyer’s realtor fees. Remember you are basically buying the home “as is” and will not get any help from the seller because they are already in difficulty with their finances.
Century21 Alliance
Jim & Deborah Brady Realtors
Licensed in Pa #RS276048
Office: 610-853-2700
Direct: 610-853-8416
Cell: 610-613-3381
Fax: 610-853-4835
Website: http://www.bradyhometeam.com/
Our Blog Pages: http://yourrealestatequestionsanswered.blogspot.com/
http://www.trulia.com/blog/jim_brady/
http://www.haverfordblog.com/cgi-bin/yabb2p4/YaBB.pl?board=HT-Real-Estate
Network with me on Facebook
http://www.facebook.com/jimabrady
No comments:
Post a Comment