Is it more difficult to get financing on a short sale home?
I am interested in buying a short sale or foreclosure. How is the process different than a regular sale?
The process is totally different. On a regular sale, the property you buy can be moved into immediately, once you obtain the financing. Short sale process can take months so if you need to buy or move soon, short sales is not for you. Here is why:
On a short sale, a short sale package must be submitted to the bank and it must be 100% complete or it will never be touched by the employee at the bank handling the short sale. It requires documents from the Seller(s), including a Hardship Letter explaining why they cannot pay the mortgage anymore, 2 years tax returns, bank statements, a current personal financial statement, the Purchase and Sale Agreement, etc.
It also must have documents from the buyer with proof of funds or a letter from your financial institution guaranteeing you qualify for the loan. Some of these homes do not qualify for FHA financing and in that case your financial institution will require a 20% down payment from you.
Assuming that you got all of the above, you still don’t know what the final Sales Price will be on a Short Sale. On a regular sale, the Seller and You agreed on a price for the home and providing that the home appraises and you qualify for the loan, the sale can be completed.
On a short sale, whatever Sale Price you and the Seller agreed to, is irrelevant in most cases. The Seller can only sell you the home, but the bank is who will decide what Price to accept. It depends on a lot of factors being the Broker’s Price Opinion of value probably the most crucial of all. Negotiating a price that both you and the bank agree can be a pain in the butt. In California, where I live, only Licensed Real Estate individuals and Lawyers (who else?) can negotiate a short sale. Check the laws in your own state.
Bank Owned (REO’s) could be a better option but you must be very careful. I talk about it on my most recent blog and you can read about it by clicking on the link below.
Hope this helps.
Getting the financing is the same. It is getting the OK from the original lending bank that it the issue.
References :
The process of getting a new loan is not different. However, short sales are problematic, subject to long delays and frequently fall through. You (as a buyer) must not only enter a contract with the seller – that contract is subject to the approval of the seller’s lender(s), and that’s where it gets sticky. Don’t try to buy a short sale unless you have the luxury of waiting a long time for the deal to close.
Trying looking at REO (bank-owned) homes instead. It’s much easier to close a deal.
References :
Yes since majority of short sale and foreclosed homes do not qualify for an FHA mortgage. A buyer needs to seek a conventional mortgage that requires a 20% down payment. Too many buyers lack that and cash for closing. The entire process can take 12 months with the buyer paying out thousands for title search, survey and inspection to wind up with a mortgage denial and no house
References :
The process is totally different. On a regular sale, the property you buy can be moved into immediately, once you obtain the financing. Short sale process can take months so if you need to buy or move soon, short sales is not for you. Here is why:
On a short sale, a short sale package must be submitted to the bank and it must be 100% complete or it will never be touched by the employee at the bank handling the short sale. It requires documents from the Seller(s), including a Hardship Letter explaining why they cannot pay the mortgage anymore, 2 years tax returns, bank statements, a current personal financial statement, the Purchase and Sale Agreement, etc.
It also must have documents from the buyer with proof of funds or a letter from your financial institution guaranteeing you qualify for the loan. Some of these homes do not qualify for FHA financing and in that case your financial institution will require a 20% down payment from you.
Assuming that you got all of the above, you still don’t know what the final Sales Price will be on a Short Sale. On a regular sale, the Seller and You agreed on a price for the home and providing that the home appraises and you qualify for the loan, the sale can be completed.
On a short sale, whatever Sale Price you and the Seller agreed to, is irrelevant in most cases. The Seller can only sell you the home, but the bank is who will decide what Price to accept. It depends on a lot of factors being the Broker’s Price Opinion of value probably the most crucial of all. Negotiating a price that both you and the bank agree can be a pain in the butt. In California, where I live, only Licensed Real Estate individuals and Lawyers (who else?) can negotiate a short sale. Check the laws in your own state.
Bank Owned (REO’s) could be a better option but you must be very careful. I talk about it on my most recent blog and you can read about it by clicking on the link below.
Hope this helps.
References :
http://www.wilnorealestate.blogspot.com