Over the last several years there has been an absolute plethora of information on the Internet regarding short sales and foreclosures, and when I say foreclosure, I mean in the process of being foreclosed on. A lot of the information on the Internet is good but in my opinion most of it is bad, and a lot of people giving it just do not understand short sales and how they work.
The two main reasons why short sales do not work are:
1. The buyer is not properly educated in how long this process could take.
2. The bank just does not get the deal worked out for several reasons.
The reason number one with how long the short sale is taking, these banks are marching to the beat of their own drum and they are absolutely buried. It could be a month, a week, two months, three months; it just depends on how long it is going to take the bank to get back. Most banks' attitude is do not call us we will call you.
The other reason is that the deal is just not getting approved because the buyer is just not offering enough money. There are some other reasons I am going to bring up as well that piggy back on this. Please take what I say with a grain of salt, see if it makes sense to you, and do some more homework on this.
We specialize in Tampa Bay, FL foreclosures
But let us use for an example an imaginary home and it is priced at $200,000. You have to understand, the bank does not own the home, the seller still owns it, and the bank does not put the price on the home, the seller and their real estate agent put the price. So they list it at $200,000, but the problem is the property is really worth, $250,000. A buyer goes out there, they put an offer on the home for a $190,000, after two weeks or two months the bank sends their BPO (Broker Price Opinion) agent out there and they do the evaluation on the home. They show it comes up to be worth $250,000. The deal is not going to work out and here is the reason why. Let us say the bank on the property is Bank of America, there is an 85% to 90% chance that Bank of America does not own and control that mortgage. It is usually someone like Fanny May, Freddie Mac, HUD, VA, Private Mortgage Insurance Company, or maybe an investor and they all have guidelines, they do not look at each individual case.
Example: Fannie Mae, their guidelines state that they can only take 85% net, it does not make any difference what the that appraisal or BPO came in at. Whether it came in at $200,000 or whether it came in at $300,000, guidelines state that Bank of America can only take 85% net of that. So 85% net, that is after all the attorney fees are paid off, any real estate commissions are paid off, any title insurance, escrow fees, if it is a homeowners' association back homeowners' association dues and penalties, back taxes, etc., it can only add up to 85%. So as much as they might want to sell the home and get it off their books, that is just the guidelines.
Now there are a lot of other reasons. Sometimes you have two mortgages, the first mortgage will only want to give the second mortgage maybe $3000 to relinquish their lien and the second mortgage wants $10,000. Other things that could happen are the seller ends up going in there and vandalizing, taking stuff out of the home when they move out. I have had sellers completely gut homes, there are no kitchen cabinets in, there are no counter tops, there are no air conditioning units or handlers, and there is just nothing there.
So there is certainly a lot of liability, certainly the more liability the better price you will get, but really keep in mind when you are looking at buying a foreclosure or a short sale just look at the comparisons in the area. If it seems like it is too good a deal to be true, it probably is. They are going to have to use, unless it is VA. VA only requires three solds, but if they do a BPO, everybody else they are going to use three actives and three solds. By all means have your real estate agent out there when they do the BPO to make sure they have the proper data, because a lot of times BPO agents do not.
I hope this helps you and gives you a little insight on how to buy a short sale. So if you have any questions, feel free to get a hold of us at www.tampa2enjoy.com. We would be more than happy to answer any questions you have.