Short Sale FAQs

 

            

 

As a result of the many questions that have been asked by my clients in regards to short sales I have put together a question and answer document. This should answer a lot of the questions you may have. If you need more answers feel free to give me a call.

 

Due to the current economic climate, many current listings are disclosed as short sales. A short sale is a transaction where the net proceeds from the sale of a property are not enough to cover the seller's mortgage obligations and closing costs, such as property taxes, transfer taxes and the real estate practitioner's commission. Short sales bring about a large number of additional considerations not found in a traditional transaction. Following are some of the most commonly asked questions in short sale transactions.

 

Does the lender have to approve of the short sale price prior to offers?

 

Yes. The seller's agent and the bank agree before the listing as to what the lender will accept for the price of the home. This is not set in stone. There is a lengthy short sale package the agent puts together for the seller and the lender. The process has gotten better and is easier to understand but each situation is different.

 

Is there actually a contract between the buyer and the seller?

 

Yes. Unless otherwise agreed there is a contract between the buyer and the seller. It is contingent upon the lender's (and other lien holder) approval, but is a contract.

 

How does a short sale differ from a regular real estate transaction?

 

A short sale offer is submitted to the seller like a normal transaction. The difference is that the sale of the property is contingent on the lender, the third party, accepting the contract. This, on average, takes between 30 – 120 days because the lender typically waits to see what other offers come in.

 

How are offers handled by the seller's agent?

 

Each transaction is different. The listing broker should present the offer to the seller for review. The seller can then decide to accept the offer and present it to the third party lender. It is still the seller's decision whether to hold an offer or not. The lender generally wants the highest possible price but once an offer is signed that is the one sent to the lender. There is a gray area here because each agreement between a seller and lender is different and the lender may want to see all offers and in this case some on the low end would miss out. There is legislation to stop this to make the process smooth and close in less time but so far the process is progressive in nature so be prepared for it.

 

May I withdraw from the agreement after the expiration of the time period allotted for the lender to approve the short sale? Can the buyer walk away?

 

In most cases the buyer can walk away and there would be an agreement between the bank and buyer as to when that time period would be. In some cases the buyer's deposit could be in jeopardy. If more time is needed than originally agreed upon in the contract, the parties should execute an extension to reflect a new time period for approval.

 

How do I know the property I want is in a short sale situation?

 

Based on new MLS rules the properties listed will say if the property is a short sale or not. By law the property also has to have an active/contingent warning if there is a contract that has been submitted to the bank. An offer could then be submitted but it would be held in a back position in case the property fails to close. It is best to submit offers that are active and have been on the market for a short time.

 

What could I do as a buyer to help the process?

 

FINANCES! Make sure that you have your financial information together. Banks won't even care about an offer unless you have proof of how you will pay. Most of the short sales in the Cape Coral/Fort Myers are cash deals. Have proof of the cash with actual statements. If you will mortgage the property there needs to be solid proof from the banks that you are qualified for the loan. It is 10x more stringent with these banks than a normal real estate deal so the more prepared the easier the deal will go through.

 

 

 

 

Terry Manos

239-560-4043

manost33@hotmail.com

 

Financial Crisis

I think this is pretty accurate but am convinced that this started years ago and would take more than this timeline to get down to where it starts. I have gone back as far as the 70s but it could really go back to when Fannie Mae was started in 1938. It is a complicated system that involves about dozens of people and everyone from politicians and bankers, which provide the market, to the realtors and brokers, to the consumers buying the homes. Lee County has been hit harder than most in this crisis and it is wise that we learn from these mistakes and take responsibility for what has happened by acting responsibly. It is sad that the people hurt by this were the very ones buying the homes and not being able to hold on to them. The banks and the politicians will be fine. I would like to see them accept some of the responsibility.

Terry Manos

News Press Article on Lee County

Lee County is in trouble when it comes to bringing business in to the region. I recently did a paper on bringing in a quality Business and Technology Park to utilize the University and hopefully bring jobs in. This kind of development has been shot down in the past but should be looked at if we are going to grow. Snowbirds are still here between October and May but the area has learned that only brings short term growth. Growth in the summer months is an important part of building this economy and bringing jobs. This article is a good one that sums up the general outlook of the area and will give insight on what the future holds. There are some things that I have suggested to these very leaders and hope they will get aggressive in building the area up for more than just tourism and snowbirds which is an important part but there are a lot of people left over from the boom that need and want to stay in the area all year around.

Terry Manos

Buyers Still Need Good Credit

This is an article about buyers and their need to still have a good credit score to buy a home. There are a lot of programs out there for 1st time buyers but it still requires them to have a great credit score as well as 20% down. Bad news is that it hurts some buyers who want a home but don't have the down payment. Good news is that banks will no longer be giving loans to anyone and in the long run it will help the overall market and there should be plenty of money for those that watch their credit.

Terry Manos