Can I buy a Short sale with a VA or a FHA loan? Maybe is the best answer. It depends upon the condition of the house.
All real estate transactions where a buyer is obtaining a FHA or VA loan will require an appraisal to determine the value and whether the condition of the property is safe, sound and secure. If a property has appraisal repairs, then this may be a problem.
A seller is selling a property short because they are typically behind on their mortgage, have a negative equity situation, and cannot to afford to bring the mortgage current. Consequently the seller does not typically have money to correct defects in the property. The property may or may not be in good condition. But I always want to ask, if the home owner could not make the mortgage could he afford to maintain the property. The majority of the time I find that the short sale properties have repair issues.
In addition, these loan products require a clear termite certificate. What if the property needs to be treated for termites.
Who will pay? If the seller doesn’t have the money to pay for the repairs; can the buyer pay for the repairs. Well I would strongly council any buyer to not repair any house that is not their property. They could treat for termites or spend money on the house and it not close for many reasons. In real estate, we always say it isn’t closed until it is closed.
When submitting a short sale offer, the seller’s lender is required to participate in the transaction. It is possible that there is more than one lien holder on the property. If so, all lien holders will have to participate. This can take time and negotiation. If the lender refuses to sign off on the offer, there is no deal. This can take a long time—generally 4-6 months. After the seller’s lender has agreed to the transaction then the buyer should perform their inspections and appraisal. Noting that the sale is “as is”. Consequently the VA or FHA buyer may have waited a long period of time for a house that will not appraise without repairs.
If you have other questions about real estate, please feel free to call me at 405-213-2992 or visit my website http://www.sandiwalker.net
Patience, Patience, and lots of patience.
Short sales should be called long sales as in time requirements. It often takes many months to get a short sale accepted at the bank. However if you are not in a big hurry, you may be able to get a good deal.
The seller’s lender will need to sign off on the contract in addition to the seller. The majority of the time the lender will want to see an offer on the property before starting the short sale procedures. Local lender’s may want to determine value sooner than a larger national bank. Either way, the seller’s lender will do the following in order to complete a short sale.
1. Current owner will fill out a financial package to determine if they qualify for the short sale, including a hardship letter detailing why they need the short sale.
2. The lender will review the short sale packet. This takes time.
3. If the owner qualifies for a short sale, they will send out an appraiser to quantify the value of the property. They may also request a BPO (broker’s price opinion)
4. The current lender will use the appraisal price to determine the amount they are willing to accept on a short sale. Most of the time, the realtor will reduce or increase the list price at this time to match the appraisal price.
5. The lender will accept a net amount based on the appraisal price. (In my experience, this number has been 86-88% of appraisal price)—remember this the net to the seller’s lender after all expenses, realtor fees, etc. So there is not a lot of room off the appraisal price. Hopefully the appraiser has not over valued the property.
6. Several people at the bank will need to review the short sale offer and sign off on it before turning it over to a closer to set the closing up.
7. The new buyer will need to make sure their lending requirements are met. I do not advise buyers spending money to do inspections or appraisals prior to the current bank’s approval to sell. Once that approval is given, the rest of the sale works mostly like a regular sale.
Just remember that these homes are sold as is and where is and may have some repair requirements.
If you have real estate questions please feel free to call me at 405-213-2992 or visit my website http://www.sandiwalker.net
Borrowers who are months behind on their mortgage and facing foreclosure may be surprised to learn that the lender or guarantor of the mortgage may be willing to pay you to relocate following a successful short sale.
Some have asked why they would do this after not receiving payment for many months and possibly a year or more, having forced insurance put on the property and keeping the property taxes current.
Until the borrower pays off the mortgage, the bank is truly the owner of the property which it holds as collateral for the mortgage note. If the property is damaged by a irate and irresponsible borrower or by vandals, the property becomes worth less than it might have been had someone taken care of the property. Properties that are left vacant without utilities are more likely to become vandalized or have squatters move into the property.
If the borrower is not paying the note, the bank in time will get the property back in some condition and they will sell it. So it is sometime advantageous for the bank to entice the borrower to stay in the home, maintain it, and keep the utilities on in the property while trying to sell the property.
Last week, an FHA borrower received $750 from HUD as relocation assistance on a closing I did. This week I have a VA borrower who will receive a $1500 relocation incentive. I have heard of larger amounts to some borrowers in dire straits. While no realtor can promise that you will receive money for selling your home short versus allowing it to go to foreclosure, it may be possible to obtain these funds. More importantly, selling a home short most offend allows the borrower to have the deficient money forgiven.
If you are in a position where you can no longer afford to pay your mortgage, please call and let’s see if I can help you avoid foreclosure.
Please feel free to contact me, Sandi Walker, at 405-213-2992 or visit my website http://www.sandiwalker.net with all your real estate questions.
A short sale is when the lender accepts a payoff less than what is owed on the property. It avoids foreclosure and the worry that the lender will sue the borrower for a deficit judgement.
In our current market, not all homes are worth what is owed on them. We sometimes refer to these homes as being under water or with negative equity. While property typically appreciates in time, during the past several years we have seen properties devalue. In Oklahoma, we have been very fortunate that most of our values have remained flat or had a minor adjustment in value. This is frustrating and scary to the homeowner but if you’re able to make the current mortgage payment then I suggest that you continue to do so. The likelihood is that the economy will improve at some point and the value of these homes will increase.
The bigger problem occurs when life changes–people lose jobs, get divorced or have a serious medical condition –and you cannot continue to make your current mortgage payment. At that point the borrower has a few options: Contact their lender and try to work out a payment plan, do a deed in lieu, allow the house to go to foreclosure, or attempt to do a short sale.
In order to do a short sale, the lender is going to want to know why you can’t make the mortgage payment. They will want to see your bank statements for the past two months, pay stubs, and a hardship letter explaining why you cannot pay the mortgage. In addition, they are going to want to see your tax returns. They are verifying that you truly cannot make the payment.
Short sales do have a negative effect on your credit. The hope is the lender will forgive the deficit and mark the file paid. This does not always happen. I have had a file where the lender wanted the borrower to sign a promissory note for a small amount of money to be paid after the closing. This is a possibility. There could be tax liability issues. Most of the time though the lender accepts the short sale as payment in full and does not pursue the borrower for additional money.
In a future blog, I will discuss in more detail about short sales and what a buyer and seller should expect.
In the meantime, if you have questions about short sales, or other real estate questions, please feel free to contact me at 405-213-2992 or visit my website http://www.sandiwalker.com