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Nothing Short About Grand Rapids Short Sales

The following was a post we did in February of 2009, not much

has changed in 1 year. We are expecting the government to start incentives

to banks and second mortgage lenders to encourage the short sale process

instead of waiting for foreclosure.

Benefits:

House usually sells for a higher price
Credit of the seller is not affected for as long
Neighborhood values are not affected as adversely

The term Short Sale has nothing to do with the time it takes to close

this type of transaction. It refers to the money the bank or mortgage holder

will receive from the sale of the property. The closing will be “short” of the

funds that the seller owes on the mortgage. In other words, they are upside

down- they owe more than the home is currently worth.

upside down house

Since we don’t live in a past world where the home “was” worth more or

a future world where it “may” be worth more, this is the sad financial

situation many reluctant home sellers find themselves in today, selling at

a loss. It doesn’t make for happy campers.

The Short Sale scenario usually doesn’t have anything to do with

greed or mismanaging money. Many of the cases we see are typical families

that bought a home, fixed it up a little, and then got a job transfer, had a job

loss, a divorce, a family death or illness occurred which drastically changed

their financial situation.

not happy

What the falling prices on homes does is trap the homeowner.

He can’t sell it for what he paid for it—— he has to take a loss, go bankrupt,

or lose his credit rating. Many people do not have equity in their home, or

savings, or a 401K they can borrow from to pay their losses. We see that

occasionally, but it is not the rule.

The banks and mortgage companies are in a difficult situation.

They are going to take a loss, no matter what happens. The object is to stall,

wait, and negotiate until they get the best outcome they can for their company’s

bottom line. Okay, companies stay in business by minimizing losses.

But, and this is a big but, stalling, and prolonging these transactions

until the potential buyers walk away is hurting everyone. Delaying a month,

two months, three months on answering a decent real estate offer hurts the

bank, the seller, the buyer, and the real estate agent. This kind of time lag is

typical of short sales. I have heard getting these transactions to close as

compared to ” trying to land a 747 on a blade of grass. ”

Real Estate agents don’t like to get involved in these transactions

because they are prolonged, messy, tons of paperwork, many, many frustrating

phone calls, and at the end of the transaction, the bank or mortgage company

will typically “short” the commission the agent has worked for. This is another

sticky wicket because the contract is with the seller, not the mortgage lender.

So, this has to be negotiated again, if you are fortunate. If not, you take what

they will give you.

Short Sales are becoming a much more common transaction as

banks are deluged with foreclosures and calls from homeowners requesting

help. The recent * Recovery Act may be a relief valve, allowing some people

to reduce their mortgage, save their credit and their home. The first week of

March the US government will tell us what the parameters of their plan are

going to be.

*Nov 2010 Note: We have seen little effect from the Recovery Act yet.

Make sure your agent has the experience and knowledge to get you

through the minefield of short sale negotiation, if you are buying

or selling a Grand Rapids Home.

_____________________________________________________________________________________________________

The authors of the this blog write about Grand Rapids Real Estate,

the Greater Grand Rapids MI area, and what it is like to live in West

Michigan. Grand Rapids Michigan is a vibrant, growing metropolitan

area with a diverse business community, great medical research & services,

numerous universities,plus lively arts and entertainment of all kinds.

We believe: Grand Rapids is a Great Place to Live!

Westbrook Realty Grand Rapids MI Real Estate

Contact Terry 616-292-7263

A Few Buying Tips on Foreclosed Properties:

Be Aware ~ Be Prepared ~ Use a Seasoned Buyer’s Real Estate Agent

The recent downturn in the housing market means that there are more and more foreclosed properties going up for sale, especially in areas which are economically depressed. Although these properties may at first glance seem like a bargain, there are many potential problems that you should carefully investigate. Apart from the usual considerations-did the previous owner intentionally damage the property before abandoning it, etc.-there are a number of under-reported potential issues you should be aware of.

Many of these issues stem from the fact that institutional sellers such as banks are simply not as interested in negotiating as an individual owner would be.

Here are several important issues to understand if you are going to pursue a foreclosed property:

1. It can sometimes take weeks for a bank or relocation company to respond in writing to your offer. Build time into your scheduling in preparation for longer delays in the negotiation phase.

2. Banks and relocation companies often have cumbersome contract addenda. Have a real estate attorney ready to review their addenda and give you some insight into the risks involved with their contract. Often banks and relocation companies will back down from their position, but it may not be worth your effort as a buyer.

3. Banks and relocation company addenda often put them in the position of being able to break the contract at will, without penalty, at any point right up to closing. Plan ahead for this risk.

4. In many markets, banks often contract to provide a warranty deed on a foreclosed property, and then when the closing documents arrive they will instead provide a special warranty deed (a lower quality form of conveyance). Speak to a real estate attorney ahead of time to evaluate your additional risks and determine if it is worth moving forward.

5. Often, at closing, the seller will claim that they haven’t gotten all their signatures so the actual closing may need to be delayed another 24 hours. This ends up preventing you from moving into your home on the date you had planned. The seller may unilaterally change your closing date and as a result the seller may not deliver ownership exactly as scheduled. Building extra time into your schedule will help in this situation.

Examples from a recent survey of buyer’s agents include:

“On a recent foreclosure my Buyers and the Bank (the seller) verbally agreed to their offer. We waited 3 weeks for them to put it into writing.”

“Lender taking 2+weeks to respond to an offer. Lender not informing us they are already considering another offer. Lender going to closing without having valid deed. Lender refusing to turn on utilities for proper house inspection.”

Forms of conveyance will vary by state.

What You Can Do

Most of these challenges can be overcome through due diligence. Always “read the fine print.” Have a real estate attorney ready to review contracts and give you insight into the risks involved. Occasionally, banks will back down when confronted with legal counsel.

Be sure to build extra time into your schedule:

Banks and relocation companies are notorious for dragging their feet.
Prepare yourself for long waits during negotiation.
Don’t plan to move into the home or start renovations the day of or the day after a scheduled closing.
The seller may unilaterally change it and delay an extra day.
Don’t assume the transaction will close on time and don’t assume that the seller will deliver ownership exactly as scheduled.

Foreclosures Selling Faster? Article

Stripped & Violated – This House Could be Next Door Article

Greater Grand Rapids Area Information

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Tag Archives: bank foreclosures

Nothing Short About Grand Rapids Short Sales

Nothing Short About Grand Rapids Short Sales

Buying Foreclosed Homes is NOT FUN