Black and Buono Blog

…by Kiley Black

Those searching for the best housing bargains on the market might consider buying a short-sale property. But there's an important qualification for buyers interested in going this route: They need plenty of patience.

In a short sale, a homeowner's lender agrees to accept less than is owed on the mortgage for the property. It's a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.

Banks have really become aware that short sales are the best way to reduce their losses... when a modification is not an option.  The short-sale option also is less damaging to a seller's credit than a foreclosure.

A short sale can also be attractive to a home buyer since the lender will often accept bids on the property that can be 10% or more below the market value.

In general, it takes a minimum of two months to get a response from the bank whether they will accept or counter your offer.

Are the savings worth it to you? Consider these five caveats before shopping for a short sale:

1. You'll wait in the dark
Perhaps just as frustrating as the wait time is the fact that you likely won't be privy to details as the deal is progressing. That could mean going months without an update.

Banks are "ramping up their capability for short sales," said Dennis Green, general manager of ForeclosurePoint.com. But it hasn't made the process much easier.

2. Banks will make you a deal, but within reason
There are deals to be found in short sales -- but don't expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently. The misconception is that banks should be happy to get it off the books, but offers need to be realistic.

Homes that have already been foreclosed on may be even less expensive than a short sale. But bank-owned properties also might be in worse shape, especially if the foreclosure home has been sitting vacant for some time.

3. Sales are 'as is'
In a short sale, it isn't likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale. Do a home inspection and know what you're getting into, but remember that your bid is for the property "as is."

4. Have a back-up plan
Even if you decide to bid on a short-sale property, it might be best to keep looking anyway.

There is no guarantee with short sales, and if the buyer is smart they will put an offer on a short sale they like and continue to look at properties that interest them.  That said, when a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home.

5. It's not only about price
You're buying a house to live in. Buy a house you like. Buyers should remain open to properties of all types -- short sales, bank owned and traditional sales -- and compare prices and features.

A short sale is only a bargain if it's a home that you truly want to live in -- not something you're drawn to only because of its low price tag.
 
Original article on Market Watch

...by Kiley Black

There are many people across Framingham, Marlborough, Worcester and Natick that think they cannot sell their homes because they owe more than their house is worth. This is called a short sale. You may also hear it referred to as “being underwater”. Many people think they can’t sell their home because the house prices are dropping in their town.

You are not alone in this situation. Due to the downturn in the housing market, there are many home owners who have found themselves in the same situation. The most vulnerable are those who bought their homes within the last five years or so and now need to sell either because of a life change or a financial problem. Home prices in many cities and towns across Massachusetts are much lower than they were at the peak of the market, and there are associated costs to selling your home.

Much of the time, your lender will want proof that you cannot sell the house for the amount that you currently owe on the property. The lender may require that you list your house for some amount of time, usually 90 days, before they will consider a short sale or reworking the terms of the note. Mainly, the bank is trying to minimize their loss and assess their risk in re-establishing a new loan for the new buyer.

You should first talk to your lender or bank to see what they require for a short sale. Get everything you can in writing.  A real estate attorney can help you with the process. You will need an attorney when the bank is ready or working on accepting the offer.

You most certainly need a realtor to give you a fair market value for your home and then list your home based on the bank requirements.

Short sales can take a lot of time. The negotiation could take months. If you are selling your home as a short sale, you may have a tax liability equal to the difference between your loan balance and today's market value. The debt may or may not be forgiven by the lender, depending on your assets and financial status. This is another reason you should have a real estate attorney involved; you certainly don’t want any surprises after the fact.