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What do I need to know about putting in an offer on a Foreclosure or Short Sale home?  Your offer must be accompanied by a pre-approval letter from your lender for at least the amount of your offer.  Contingencies such as "Sale of Home", or "Lease Purchase" will not be considered.  To receive daily foreclosures, Short Sales, HUD, and VA homes in a specific area and criteria call 24-hr recorded message 1-800-718-5607 x 1226 and leave your email info.

 
How do I know if a home is a Foreclosure or Short Sale?  Typically it will be noted in the TOP MIDDLE of the MLS listings above.  Look just under the AREA.  It should look something like this:  Er/Ea Exc. Agency-Short Sale
 
What is a Short Sale? Owner has (or is about to) incur a "hardship" which will make payments on subject mortgage impossible.  Therefore the lender has agreed to take less than is owed on the loan to help get it sold.  Owner may (or may not) be behind on payments.  Owner might have lost a job (or was transferred) and is now paying dbl housing payments.  Lender will get the contract after Owner initially accepts it. Offer has to be reasonably close to market value for lender to approve. Because so many owners are in this situation lenders are flooded with Short Sales. Typically takes 3 month to get a contract accepted + 3 additional months to close.  Typically purchased “as is” with no repairs.
 
What is a Foreclosure?  Foreclosed property that had Conventional Loan.  Lender owns it and will negotiate deal.  Typically takes 2 to 10 days to get a contract accepted.  Typically purchased “as is” with no repairs. 
 
Are there special concerns on a Short Sale offer: Yes:
  • Make your offer contingent on buyer inspections and appraisals after formal acceptance of your offer by the Short Sale lender.
  • On rare occasions the Short Sale lender will counter back above MLS list. NOTE: Pre-listing price approval is difficult (for even an extremely competent Realtor) and most listings are priced...based on MLS comps and Realtor's best knowledge.
  • Expect up to 3 mo for your offer to be assigned a negotiator and accepted or countered.
  • Typically the MLS list price reflects the reduced price the Short Sale lender is likely to take. "Low ball" offers will typically not be considered in the final stage of acceptance...or will get "bumped" out by a more reasonable offer that comes in.
  • Typically only one offer (with the best bottom line to lender) will be forwarded to lender to be considered at a time. If another better offer comes in while yours is on the table...then yours may be "bumped". However, listing Realtor should send you "multiple offer" notice giving you an opportunity to adjust your pricing prior to the other offer (s) being submitted.
  • Expect an additional 30 to 60 days to close after formal Short Sale lender acceptance. WHY? Because there are so many in the pipeline it takes that long for the Short Sale lender to finalize the paperwork.
  • Be sure to keep your lender apprised of the time frame and be aware of how the delays might affect your interest rate lock (or trends).
What is a HUD Home?  Lender has foreclosed on a property that had an FHA loan (guaranteed by Federal Government). Typically these loans are under on homes under $300,000.  Federal Government (HUD) now owns it and will negotiate the deal.  Typically takes 2 to 10 days to get a contract accepted.  Typically inspections have been done. From those inspections, HUD will disclose that property is either purchased “as is” or a disclosed (Escrowed) amount will be paid to buyer at closing to do repairs that bring the property to par.  Bids are taken only through your Realtor and are submitted on line.  All bids are gathered (from owner occupants only) during an initial 3-week offering period. Bids are opened all at once and sold to person offering the highest bottom dollar to HUD. $1000 earnest money required at time of bid. Typically bids must be at asking or over to get the winning bid.  If not sold in the initial 3-wk period, then investors (non-owner occupants) can bid.  NOTE:  Some professions like Police, Teachers, etc. are given special permissions to bid on properties.  Ask about that if it is important.
Information is believed to be accurate, but not guaranteed.
 

By J. Charles Kelly (JCK), RE/MAX Elite www.JCharlesKelly.com

 

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  • Featured Agent - J. Charles Kelly

    J Charles Kelly

    Brentwood, Tennessee

     

    J. Charles Kelly is a 20-year Top Listing and Selling Realtor, with RE/MAX ELITE based in Brentwood, Tennessee. She has been the Tennessee top listing agent of 140 (Companywide) Dobson & Johnson Realtors (past) and top listing agent of 27 (Brentwood) Dobson & Johnson Realtors (past).

    Kelly works with buyers and sellers. J. Charles Kelly is a Real Estate Investor & Past VP of REIN (Real Estate Investors of Nashville). She has experience as a past columnist for "The Real Estate Courier" and Metro Magazine. Her main focus today is residential.

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