Crucial Short Sale Advice for the Greater Cincinnati Area
December 12th, 2007 categories: Real Estate Buying, Real Estate News, Real Estate Selling
Clients and friends are calling and emailing me looking for “insider information” on foreclosed or short sale properties. In Ohio, the local Sheriff’s department handles the foreclosure auctions. As a buyer, you must be willing to attend a sheriff’s auction to bid on a foreclosed property then wait 30 days for the owner to either come up with the needed money to repurchase their home or vacate.
Prior to the foreclosure process, some sellers opt to work with their lender on what is called “Short Sale”. Short Sales are sales which net the lender(s) less than the full mortgage amount. As a buyer, you may get a great deal on a property- but you must have patience with the process and the extended time short sales require between contract acceptance and the actual closing. Buyers possessing knowledge of the “Short Sale” process will have greater luck negotiating with distressed sellers.
The “short sale” process begins when the seller is experiencing difficulty making mortgage payments and the potential sale price is less than the mortgage amount. The seller or their agent approaches the lender to determine if they are willing to settle for less -if and when a purchase contract is signed.
The lender’s “loan mitigation” department reviews the seller’s request and paperwork and agrees to review (this is not a guarantee of approval) a written purchase contract from a qualified buyer. As the lender, imagine $250,000 mortgage due with a probable sale price of $220,000. After property taxes, $5,000 and sales expenses estimated at $15,400 (total expenses = $20, 400+loss on sale of $30,000) the lender has to be willing to settle for $50,400 less than what is owed on the mortgage- or “short” $50,400. Not all lenders are willing to go this route.
As the purchaser, you execute a normal purchase contract which will have an addendum stating something to the effect “contingent upon seller’s lending approving short sale payoff.” You and the seller agree to all the terms and the contract is signed by all. Unfortunately the lender’s approval does not come in a matter of hours or days- it may be weeks or months.
Be patient! The average time for the lender to review and respond to contract may run as long as 12 weeks. Once the lender has approved the short sale contract, you need to get your inspections completed and be ready to close- usually within a two week time frame.
This scenario is based on the homeowner only having one lender negotiation to handle; the time frames could change when multiple lenders are involved. There is definitely some well priced properties available in today’s market as long as you are not short sighted about the complexities of the short sale process.
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Some great information about short sales. Many people are misinformed about the process and may not even consider it an option. Being patient is definitely key to a successful.
Thanks Jon. You seem to have a lot of information about short sales on your site-