What Can a Buyer Expect In a Short Sale or Pre-Foreclosure Transacation??
OK - You have found the home of your dreams and it is a STEAL! You make an offer and the seller accepts - YEA!!!! But wait.... the seller's bank has to do something...mmmm... Now What???
As a Buyer this new market can sometimes be confusing. Back in the day when you used to make an offer on a home, you would have it accepted in 48 hours, be in binding agreement, have 10-14 days to do your inspections, closing within 30 days of contract, and joyfully move into your new home. This is not necessarily the process anymore.
If you are making an offer on a short sale (pre-foreclosure) home, you need to understand the process BEFORE you make the offer.
Step One - You make the offer (same as always).
Step Two- The Homeowner accepts or negotiates the offer (same as always).
Step Three- You come to an agreement and go under contract (again same as always).
Step Four - The offer then has to get ready to be presented to the bank for approval. (NEW STEP)
The listing agent and the seller work together to put together a package to send to the bank that includes but is not limited to:
* a hardship letter from the seller stating why they have to sell their home for less than what is owed
* a financial data sheet breaking down where every penny is spent
* a Preliminary settlement statement showing how much money the bank will receive
* the two most current bank statements
* the two most current paycheck stubs
* the last two years of tax returns and W-2’s
* the listing agreement
* copies of the listings from the MLS
* the listing history of the property
* area statistics
* the offer
* and the list goes on...
My package is typically 60+ pages long. Most of this may already be in place but some of it such as the settlement statement, recent market stats, bank statements and paycheck stubs may have to be updated. I typically have this done within 1-2 days of offer but I would recommend giving 5 days to have this completed. The package needs to be completed thoroughly. If even one page is missing in this package the deal can stall. This package is designed to make the bank want to accept your offer. This is for the benefit of the seller (who is getting out from under a debt) AND for you the buyer (so that you can get a good deal). You want this done right the first time. YOU NEED TO HAVE PATIENCE!!!!
Step Five - The package is sent to the bank. (NEW STEP)
The bank will typically take anywhere from 72 hours to 7 days before they even acknowledge they have received it.Then it can take anywhere from 7 - 30 days depending on the bank for them to even open the file.
Please keep in mind that these banks are overwhelmed. They probably have a pile of 20-30 (or more) files on each persons desk that they have to go through. They are overworked and are learning on the fly.
Step Six - They are now paying attention to YOUR OFFER.
Step Seven - The bank orders a BPO.
A BPO is a Broker Price Opinion. Either an appraiser or another real estate agent goes out to do an inspection on the property and determines the value of what the home is worth. This can take from 7-14 days. This is then sent back to the bank for their review.
Step Eight - The loss mitigator at the bank accepts the offer and now sends it to his supervisor for final approval.
This step can take anywhere from 24 hours to 4 weeks depending on the bank and whether they have to obtain board approval.
Step Nine - They approve it! YEA!!!
Step Ten - They contact the listing agent and convey final approval of the offer.
Step Eleven - The clock starts ticking on all the inspections and contigencies that are tied to the binding agreement date.
This clock doesn’t start until this bank approval.
Step Twelve - YOU GO TO CLOSING!!!
Step Thirteen - YOU MOVE INTO YOUR NEW HOME!!! YEA!!!
This is a somewhat abbreviated version of the short sales process but it gives you a little more of an understanding.
Please understand that in a pre-foreclosure or short sale, the bank is accepting less than what is owed on the home. This is a distressed sale.
This entire process can happen in as little as 45 days, or as long as 4-5 months, depending on how backlogged the bank is.
PATIENCE IS A VIRTUE!!!
Listen, if you are buying a house that is worth $150,000+ and getting it for $95,000 you are getting a STEAL!!! Your patience will more than pay for itself in the long run.
