Charlotte Real Estate, Foreclosures, Short Sales

Myth, Short Sales Don't Work

It depends who you ask.  Short sales can work or bomb for both the buyer trying to purchase a home as a short sale or the homeowner trying to sell their home with a short sale prior to foreclosure.  We've been facilitating short sales for years and here are the most common mistakes we see on both the Realtor representing the homeowner and the buyer who submits an offer:

1. The home is not really in default and is listed as a short sale. 
When I look through our local MLS, I see homes listed as "short sale", but the home has not received a notice of default.  A notice of default is basically a notice given to the borrower that they are in default; have not made their regularly scheduled mortgage payments to the lender.  It states that if the money owed is not paid by a certain time, the lender may chose to foreclose the borrower's property.  Some homes have not reached this point yet.  If they have not, a contract submitted to the bank will most likely NOT get assigned a negotiator to short sale the balance on the loan. 

Buyers, make sure the home is actually in foreclosure.

Sellers, do not allow a short sale comment to be posted on your home just to get an offer.  The property needs to be in foreclosure.

2. The homeowner does not approve the submitted contract and holds out for a higher offer.

If a property is truly in foreclosure, the seller has actually lost the right to negotiate.  Not literally, because they still own the property, but in all actuality you need the lender's approval to discount the loan.  It makes no sense.  Final approval is going to come from the lender. A negotiator will be assigned to speak to the agent representing the homeowner. 

3. The agent does not submit a full short sale package.

If you are facing foreclosure, please make sure you are working with an agent who has facilitated short sales and has experience.  When you are weeks away from eviction, now is not the time for an agent to "practice".  Once the homeowner signs the letter of authorization authorizing the agent to speak to the default department/loss mitigation department about the loan in default, the agent should request the list of documents required to be sent as a short sale package.  Many banks such as HSBC, Countrywide and Option One have a dedicated page listing the documents needed to submit for a short sale.  Submitting an offer without the supporting documents will lead to the offer being denied or a huge delay in processing the short sale.

4. The price listed in the MLS for sale is based on fair market value.

We see too many homes listed at fair market value or even above FMV.  There is not anything "fair" about a short sale, that is why it is called a short sale.  Agents, please short the sale and list the homes at the percentage either obtained from the lender or at a 30% or higher discount.

5. The buyer submits an offer FULL of contingencies.

We see many offers full of loan and inspection contingencies.  There are also a number of contracts submitted with the seller paying closing costs or a portion of closing costs.  Buyer agents please know that the sellers are totally insolvent at this point and can not pay closing cost.  A net sheet along with other supporting documents will be sent to the lender.  Discount the property based on the pre-inspection and closing cost desired.  Chalk it up to the cost of doing business and spring for an inspection by a general contractor.  Know that the homes will have cosmetic repairs to be made, but be more concerned about the structural soundness and mechanicals of the property.  Yes, we have negotiated closings costs to be paid by the lender and they are recently being approved at a higher rate, but it still doesn't make for a clean offer.  The negotiators are working with a historically high amount of short sales.  The cleaner the offer, the faster the approval.

6. The buyer does not have a team.

If you are interested in buying a foreclosure, short sale or home at auction, you need a team.  The team will consist of a mortgage broker with hard money lending experience, contractor, title/escrow agent and general contractor to name a few.  Make sure each member of the team is reliable, has experience in this arena and works weekends.  Know the cost of doing business up front and you will lose less in the end.

If you are facing foreclosure or if you are a buyer interested in purchasing a short sale or foreclosure, please contact us today at (704) 559-5988 X 5.