Whether it’s pre-foreclosure (short sale) or bank owned (post-foreclosure) … EVERYBODY WANTS TO BUY A FORECLOSED HOME … Why not? In most cases you move in with instant equity right? Well, not in all cases.
There are several factors to be considered in a short sale or bank-owned home. It’s a whole different game. You can’t game a bank and you can do everything right as a buyer and a buyer’s agent, but all the players involved have to know what their doing or it can all fall apart. Know what your up against when your going for short sales and bank owned homes, they are not for everyone. If your a home buyer who isn’t set on a particular house, doesn’t need to move anytime soon, can float on interest rates and have their loan approval and program in place at the drop of a dime, it could work out good for you.
With the higher priced homes there is a much higher success rate and the length of time is considerably shorter, I would estimate anything over $500k. If you’re trying to buy for under a $200k price point, you should familiarize yourself with the process and have a back up plan in place, there is a lot of competition out there!
A short sale is where the seller is behind on their payments (in most cases) and is trying to negotiate less than what is owed with their lenders in lieu of foreclosure. This could be for many reasons: Loss of job, death in family, reduction in income,neighborhood prices, medical bills, etc.
A seller is still a seller even though they are behind, all offers must go to them for their approval and signature first. After the seller signs, the offer is sent to a bank or both banks (1st and 2nd mortgage) for their approval. All transactions are subject to third party (bank)approval. The bank calls the final shots because the seller can’t get a high enough offer on the home to pay the mortgage in full hence the subject to. 1st step is to write an offer and send it to the listing agent who in turn meets with their seller, just like normal real estate transactions.
Some seller’s will accept any and all offers. Other’s will wait for an offer they feel the bank will consider since typically only one offer goes to the bank (however it is up to the bank if they want multiple offers or just one offer) I’m in favor of the seller accepting the offer no matter what, it does 2 things:
1) An offer get’s the short sale started with the bank. In order to do a short sale the bank requires a “short sale package” which consists of a hardship letter, pay stubs, taxes, financial statement AND AN OFFER on the home. The Lender who has the mortgages on the house will not even give you the fax # or help in ANY WAY until you have an offer. You have to turn in the short sale package all at once. So even though your offer may be extremly low then I feel it’s in the seller’s best interest to not wait around for another “higher”offer even if it’s low- JUST GET THE PROCESS STARTED.
2) The second reason is even if your offer or “the offer the seller accepts” is too low, it still favors the seller in my opinion because the bank will more than likely counter back or give you a NET price they want out of the house in most cases which in turn will give the listing agent a good idea of what price the bank is looking for in the short sale, so if you can’t offer enough, they can advertise APPROVED SHORT SALE PRICE and find another buyer who can afford it without AS LONG as a wait in most cases.
There are some agents that will guide their seller’s away from taking anything but the best and highest offer in fear of the bank trashing it.Each agent does things their own way. If the agent is having a lot of activity and thinks they can get an offer $30k higher than yours they might hold out for the higher offer…the agent’s job is to get the highest and best offer for their seller at the same time getting a short sale to go through. You have to plan it all right.
Some agents will counter for a higher price up front with their seller and that price might not be what you can afford so your offer will never get sent to the bank.
We all need to be realistic. In the lower priced homes under $200k Let’s say there is a $150k first mortgage and a $50k 2nd mortgage. Usually the 2nd will take $3k or even 5-10% on an typical bases-so say they take 10% on the 2nd mortgage, this leaves a balance of $155k + all the back payments the seller owes, back taxes that weren’t paid more than likely, seller title fees and closing costs,realtor fees etc… so we can easily be at a price of $175-$180k the bank has into it even after the 2nd knocks off the$45k. Every house and scenario is different. The 2nd mortgage is in 2nd lein position so typically if the home goes to auction (foreclosed), the 1st will take back their balance in full from what the final bid amount is at the auction IF THE HOUSE SELLS AT THE AUCTION. If the home sells for enough and money is left over after the 1st is paid, the money goes to the 2nd mortgage. Typically there is not enough money left and the 2nd mortgage get’s nothing! This is why in most cases the 2nd will settle for less than what is owed. This process works differently for lines of credit/ Heloc’s as seconds keep in mind.
I just had a client close on a $250k house for $137k this took 5 months, and a $998k house for $575k which took 52 days. It depends on the 1st mortgage holder and the investors (Fannie Mae & Freddie Mac if they are involved (government backed loans) the house,condition,the amount owed,comparables, loan product etc. Typically we have seen approximatly 85% of the appraisal is where the bank will start their counter offers, but EVERY HOME, EVERY HOUSE, EVERY BANK is DIFFERENT! Agents almost NEVER can find out what the banks appraisal came in at either, it’s the negotiator at the banks power tool.
It also HUGELY depends on the listing agent working the short sale! We could have all of our ducks in a row and even be at a good price acceptable to the bank..if the agent doesn’t check in, stay on top of the bank and make sure paperwork is turned in, and not lost, then we are in trouble! Many agents will call when the recording tells them or the rep says call back in 30 days, and they do..well 30 days ago they were missing one page and you didn’t call so the bank closed the file. Now you have fax all 100 pages again wait 2 weeks for it to be in the system and go through the whole process again!
The process at most banks takes 1 month to as long as 1 year. Just because there is an auction date doesn’t mean the house will go into foreclosure, the negotiator at the bank is able to give an extension if they are still working on the file and feel the offer turned into them is worth post-poning the foreclosure auction. Every agent makes every effort to avoid foreclosure but it happens sometimes, no matter how hard we try. The bank can be unwilling to accept ANY offer or even short sale. I have seen banks even have high offers and the builder’s are doing auctions in the neighborhood and liquidating but the negotiator goes off their appraisal without having knowledge of the market in this neighborhood and refuses to sell. When it forecloses and becomes bank owned, you can get the home for cheaper than you offered on the short sale price.
Keep in mind the banks usually only care about their net, so if a higher offer comes in even $100.00 more,your offer could be pushed aside or sent to the trash bin.
In short sales, most houses are kept ACTIVE, FOR SALE on the market until the bank reaches a decision in writing to a offer. Some agents will take only 1 offer and turn it into the bank and mark the home pending per the bank and seller’s request, other agents will take 20 offers and flood the bank with tons of paperwork, and some will turn in 1 good offer and put all other offer’s in back up position. Make sure you find out how the agent handles the short sale so you know what your dealing with from the begining. The bank usually is the one giving the instructions on offer’s being sent.
Seller’s are now giving permission to tell offer prices of current offers so they don’t get 20 low offers and each offer that comes in is higher than the last. I can’t emphasize enough EVERY HOUSE, EVERY BANK, EVERY SHORT SALE IS DIFFERENT.
WE HAVE LOTS OF EXPERIENCE IN NEGOTIATING SHORT SALES PRIOR TO THE HOME IS AT THE AUCTION AND NEGOTIATING THE BEST PRICE ON A BANK OWNED HOME -WE WOULD LIKE TO MAKE OUR NEXT NEGOTIATION FOR YOU! As Experienced agents who have done several Broker Price Opinions for the banks for short sales we have the inside secrets to what factors the banks look at in accepting a short sale offer.
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Bank Owned: 2 of the largest Investors are Fannie Mae and Freddie Mac Bank owned Homes. Once a property is bank owned it still can take 1-2 weeks to get a decision but it’s a different department and they respond quicker than a short sale. Below are some questions and answers for you to review to see if bank owned/foreclosed homes are a good fit for you:
Buying a Fannie Mae property: Fannie Mae owns thousands of homes at all price levels throughout the country. You can use our search tool to view those properties or contact me and I will set you up on a search to view bank owned homes sent directly to your email as soon as they are listed!
Why does Fannie Mae have properties for sale? Fannie Mae works with all of its partners to help homeowners prevent and avoid foreclosure; however, sometimes it is unavoidable. When foreclosures occur on mortgages in which Fannie Mae is the investor, our goal is to sell properties in a timely manner in order to minimize the impact on the community. These properties are not “short sales” and the “foreclosure” process has ended. Fannie Mae is the owner/seller so the purchase process is quick and easy in most cases. These are called REO or BANK OWNED HOMES.
How is buying a home owned or managed by Fannie Mae different from other home purchases? Usually, when you buy a home, you deal with a seller who lives in the home. However, the homes sold by Fannie Mae are usually unoccupied. Fannie Mae has acquired these properties through foreclosure, deed in lieu of foreclosure, or forfeiture. Thru the Listing Broker, Fannie Mae negotiates smooth transactions that are beneficial to all parties. When buying a Fannie Mae-owned home, you should know the condition of the property, as explained in more detail below, the cost of any needed repairs, and the steps in the loan approval and closing process before you enter into a purchase and sales agreement.The contracts are written very one sided in favor of the bank and terms can’t be changed except for standard, price, close date etc. The bank can take a week to respond and in the mean time another offer can come in,or 2,in this case you will be sent a document to make your highest and best offer or leave your offer standing.
Will Fannie Mae make repairs or have they fixed everything in the house? Fannie Mae may make some repairs to properties to increase their marketability and safety; however, the buyer should be aware that other repairs may be needed. Fannie Mae sells each property “as is,” which means that the buyer accepts the property “as is.” Fannie Mae is not responsible for fixing any problems after settlement. Even if the house has fresh paint, brand new carpet, new appliances, perhaps even a new roof or siding, it doesn’t mean everything in the house is new, or even works. However I work with several contractors in the Portland area and we can obtain bids for repairs at the best prices possible so you can know what your dealing with and the cost to repair during your inspection period.
HomePath® Protection: Value Added Features for your Home Sweet Home. HomePath Protection provides you coverage for unanticipated expenses that may arise after home purchase. The coverage is provided free of charge to homebuyers who buy an eligible Fannie Mae-owned home. HomePath Protection is offered tOld Republic Home Protection Services and consists of the Old Republic Home SerContract and HomePath Protection Plus. The Old Republic Home Service Contract provides coverage to repair or replace msystems and appliances, including heating and A/C systems, kitchen appliancplumbing systems, water heaters, electrical systems, and garage door openers. As complement to your Home Service Contract, HomePath Protection Plus is provided by Fannie Mae and administered by Old Republic Home Protection. It provides an additional $3,000 in extended coverage for other specified repairs and replacementsof certain home systems and appliances.
Will Fannie Mae disclose defects such as mold, lead based paint or other known issues with the home? If Fannie Mae knows of any material defects or hazards on properties we own or market, we disclose this information through our real estate Listing Broker. However, we may not have been informed by the previous owner of all hazards and issues which is in MOST ALL CASES. We will have you sign disclosures that you will do all the testing needed to find out any issues at your own exspense. We encourage you to have the property inspected by a professional before you buy.
What type of sales contract does Fannie Mae use? Fannie Mae uses Oregon standardized forms for the real estate purchase contract and a required Real Estate Purchase Addendum for our properties. This addendum will be provided for your review once the basic terms of the offer are completed and may not be edited. If there is anything in the documents you don’t understand or aren’t comfortable with, you may want to contact a real estate attorney, or any real estate professional of your choice review these documents with you.
Closing Cost and Adjustments: Regardless of local customs, requirements or practices, the purchaser shall pay any and all realty transfer taxes due as a result of the conveyance of the property. The purchaser shall pay all other cost and fees incurred in the transfer of the property, including cost of any survey, title policy, escrow or closing fees and lender required fees. Consult with realtor on this before your offer is written.
Will Fannie Mae accept an offer contingent on the sale of my house? No, Fannie Mae will not accept offers contingent on the sale of another property. Other types of contingencies will be considered on a case-by-case basis.
Why does Fannie Mae require a lender’s pre-approval statement or proof of funds before negotiating a home purchase offer? Fannie Mae wants to be sure that prospective buyers will be able to complete the sales transaction, including obtaining financing when needed. Pre-approvals allow you to see how much house you can afford and the mortgage amount you may be able to qualify for before you make an offer on a home. It also helps you focus on homes in an affordable price range. In some cases working with a certain lender of our choice can get you special incentives such as interest rate buy downs or free appraisals.
Can I buy a house directly from Fannie Mae without going through a real estate sales professional? No. Fannie Mae depends on the expertise of local real estate sales professionals and accepts offers only through our authorized real estate listing brokers. You can contact Portland Home Experts directly (Jennifer Venable, 503-889-6472 or firstname.lastname@example.org).
What happens if Fannie Mae gets more than one offer? All interested parties may be asked to submit their “highest & best” offer in writing though the listing broker no later than a specified date and time. Fannie Mae may accept or provide a counter offer that we determine to be in our best interest. Fannie Mae is not obligated to accept any offer submitted.
HomePath® Mortgage Financing: This special financing is available on Fannie Mae homes with the logo Home Path on them. It includes:
• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
• No mortgage insurance*
• No appraisal fees
• Also eligible for HomePath Renovation Mortgage (see details below)
• HomePath Mortgage financing is available from a variety of lenders – both local and national.
HomePath® Renovation Mortgage Financing: This special financing is available on Fannie Mae homes with the logos. Available only if you make the home your primary residence, it offers:
• Financing to fund both your purchase and light renovation
• Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
• No mortgage insurance*
• HomePath Renovation Mortgage financing is available from several lenders.
Find lenders offering HomePath Renovation Mortgage.
Flagstar Bank (877) 374-3562
Call M-F 8:30 a.m. -9 p.m., S 9-5 p.m. EST.
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