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Short sales successes

When we started selling homes in 2001, short sales were unheard of in Metro Detroit.  Foreclosures were rare in Oakland County.  But times have changed and this year we have had an enormous uptick in our short sale business.

Short sales are taking place in every price range.  In the last 30 days we’ve helped buyers and sellers to close on homes with list prices between $110,000 and $999,000 in communities like Bloomfield Hills, Royal Oak and Orchard Lake.  We’ve got 5 other short sale homes in the pipeline right now, all with offers on them and in to the bank for evaluation.

Some scenarios can make a short sale even more challenging to handle successfully.  Dmitry recently navigated treachorous waters with a short sale that involved private lien holders in addition to the banks.  Three individuals had made personal loans to the owner and did not really want to accept anything less than payment in full.  The banks were offering a few grand to them to scram.  If the home and gone to foreclosure they would not have seen a nickle.  In the end there was intense drama for a few weeks but Dmitry got everyone to the closing table.  The buyers got a great house and the seller got out of a bad situation.

Buyers, you can get a deal with a short sale, but it comes at a price.  If you have the time and the patience you could be rewarded handsomely.

Tags: bloomfield hills short sale, foreclosure, short sale

From the Mailbag: A Short Sale Question

This week we got a question from Tim.  He writes:

My son and his family are relocating back to Oakland County after 4 years in the military. Their financial situation is fairly strong. They have a serious interest in a house listed as a short sale. The listed price for the home is about half the price of other listings in the neighborhood. The house is only 3 years old but has not been well maintained and needs some work. The question: How long can a home linger in a short sale status before it moves to the Sheriff’s Sale and ultimately foreclosure? It seems like a short sale is kind of in a twilight zone….neither here nor there. The home is currently occupied by the homeowners.

Tim, I wish there was a quick and easy answer to this question, but there isn’t.  First of all, the lender is under no obligation to begin the foreclosure process.   They could, quite literally, wait years without a payment before they begin the foreclosure process and proceed to having a sheriff’s sale.  After the sheriff’s sale the homeowner usually has 6 months to redeem the house, or sell it in a short sale, before the bank will take the house back and have them evicted if they are still living there.

I sincerely hope your son has a buyer’s agent, preferably one experienced with short sales.  They need to be asking the seller where they are in the process and to see some evidence of this.  Public records should give some indication if the sheriff’s sale has taken place.  Find out if there is a bankruptcy involved or a pending divorce.

The other bugger about short sales is that the listed asking price means NOTHING most of the time.  Banks won’t talk to sellers about a short sale until they have an offer.  The Realtor’s job is to generate an offer.  The bank can, after months of waiting for a response, counter at a much higher price than the seller and the purchaser have agreed upon.

The other thing to remember is that while this short sale is being processed by the bank, the current owners will probably continue to neglect it, as they already know they are losing it.

There are many, many potential pitfalls in buying a short sale.  My personal advice to most purchasers is to find a motivated seller who can sell without involving the bank, and don’t even look at the short sales.  SHORT sale is a misnomer.  There is nothing short about it for the buyer.  And there is no easy road map.

I wish your son the best of luck and I thank him for his service to our country.

photo by Kevin Dooley

Tags: short sale

11 Things About Buying A Short Sale Property In Michigan

In today’s Metro Detroit real estate market, there is almost no way a prospective buyer cannot run into a few short sale properties or foreclosures during a home search. Each is much different from a standard “retail” home purchase where you are working with Susie and Sam Seller, their agent and your agent.

In a short sale you have at least one other interested party: the bank. Quite often you have two banks if there is a first and a second mortgage. You may also have bankruptcy courts and lawyers, but we will leave those for another post.

1. Typically, your first round of negotiations is with the home owner. Once they have arrived at a written agreement with you, they will submit a short sale package to the bank(s) for consideration. A complete short sale package will include things like your offer and preapproval, a current CMA, the seller’s financial statement, hardship letter, tax returns, a seller’s net sheet and w2’s.
2. The bank(s) will send out an independent agent to provide a broker’s price opinion. This will give the bank a better sense of if the offer is reasonable or not.
3. You will usually have a lot of waiting and uncertainty to deal with. Hopefully your patience will be rewarded with a speedy approval, but be prepared for a wait.
4. The bank can counter the offer you have with the seller. If they feel the property is worth more, they might ask you to come up in price.
5. Some sellers will continue showing the home and presenting other offers to the bank after they have accepted yours. Have your agent ask the seller’s agent what he plans to do once your offer has been accepted just so you know.
6. If a sheriff’s sale is scheduled while your offer is being reviewed, the listing agent can ask to have it postponed until after your closing date.
7. If the sheriff’s sale has already taken place, you need to close before the redemption period expires or the deal is off.
8. The listing agent is very important in a short sale. She will be contacting the banks on regular basis for status updates and to keep the file moving. I have been known to call a couple of times a day. Or fax. Or email. Or all 3…
9. The seller may have some extra emotions associated with this sale since it has likely been a stressful experience. They’ve probably been dealing with the bank and difficult personal financial issues for months.
10. I typically write my buyer’s purchase contracts so that they do not have to pay for things like home inspections or appraisals until AFTER the bank has provided approval.
11. The reward can be worth the wait for those buyers who have the patience and nerves.

I’ve learned a lot from each short sale we’ve completed. Every bank is different. Every loss mitigation officer is different. Most are overworked and underpaid. Being nice, and presenting a complete package go a long way.

Short sales are here to stay for a while. You can steer clear, if the uncertainty is not for you. Or dive in with your eyes wide opened if you’ve found the home you want.

PS. Dmitry and I have attended numerous training courses on short sales and we are short sale certified.  If you are a Oakland County home seller in need of a short sale, we may be able to assist you.

Tags: buying a short sale, michigan short sale, short sale