Florida Keys Short Sales
As you browse properties, you will likely come across several properties in foreclosure with little or no equity, that is, the seller owes close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to as "short sale."
Negotiating a short sale with the lender is a difficult process, generally because it can be a long and laborious job, to even find a bank officer who has the authority to accept a discount. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right department, then the process begins.
The
lender will also ask for financial information about the seller. Sort
of a backwards loan application, the borrower (seller) must prove that
he is broke and unable to afford the payments. He must also show that
he has no other source of income or assets to repay the loan. This process
may involve as much, if not more paperwork than the original mortgage
application! Even worse, if there is more than one mortgage
on the property, the work will be even more involved.
Generally speaking, a short sale must be justified with cause. For example,
long term illness/disability of a borrower or co-borrower that qualified
for the loan such that makes it impossible to continue to make payments.
Another would be death of a co-borrower who originally qualified for the
loan. There are several other situations that would effect proper qualification.
Frivolous reasons would not be approved by the bank. Each case is weighed
on its own merit. You may want to contact the lender and explain your unique
situation. But each case is considered on its own merit.
Eventually, based on that information, if the lender decides to do a short sale, someone will be assigned to the case to determine at what price they will let the property go. That person will do all the leg work for the lender and make their determination. But in the end, they will still need to run all that information by the person with the power.
From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process - attorney fee's, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, insurance costs once they own the property, etc. In a short sale scenario, the lender gets the property sold faster, so it is able to cut its losses. The difficulty is to convince the lender that it will fare better by accepting less money now. The lender will generally hire an appraiser or a local real estate broker to evaluate the property (called a broker’s price opinion or “BPO”).
Finally, the lender generally wants to see a written contract between the buyer and the seller. The lender wants to make sure the seller isn’t walking away with any cash from the deal. None of this process even starts until as offer is made and accepted by the seller, subject to the lender’s approval. Generally, the contract must be written so that the buyer pays all costs associated with the transaction, so that the “net cash” to the seller is the exact amount of the short pay to the lender. A preliminary HUD-1 settlement statement is often requested, which can be difficult, since many title and escrow companies simple won’t prepare one in advance of closing.
Allow a lot of time to get a response - often as long as 45 to 60 days to get approval of the sale from the lender. Don’t be surprised if your short sale bid is rejected. Lenders aren’t emotionally attached to their properties, so they aren’t as likely to give away a “steal.” Many short sales fall through if the BPO comes in too high, and this is often the case. You can’t pull the wool over a lender’s eyes - if the property isn’t is need of serious repair, it is unlikely you can convince the lender the property is worth a whole lot less than the appraised value.
If you are interested in these properties please contact me and I can furnish you a list of properties