Anyone Actually Buy/Try to buy a Short Sale?

janjan212February 21, 2009

....How long did it take? Sorry for the ramble...

We (finally) sold our home. Everything is on track to close in a week. When we listed our home 9 months ago, our intentions were to buy a new construction home and have it customized to our specs. That fell through when after 6 months, we were still unsold. In hindsight, I am actually happy it fell through since prices are lower now, so are interest rates and the new construction site is currently not selling anything, making me wonder what will become of it.

While looking at a string of homes one evening, we saw one that we really, really like. Of course, it's a short sale. We've looked at a few SS's before and we'd decided unless it was something we really wanted, we didnt want to mess with the whole process just to get "a good deal" My agent talked of disappointed clients and our lender did the same.

Nonetheless, it's (so far) the only thing we've really loved. It's not even perfect for our situation (layout wise, but do-able)... and not what we expected we would buy, but we LOVE it! It's still owner-occupied and the place is in immaculate shape. (they aren't taking out their frustration on the house as is the case with some places we've looked at) We decided to offer anyway since our agent checked and was told by the LA that the bank is taking 30-45 to respond.. We figured we can wait a month or so.... The house was on the market for only a day when we looked, and 3 days when we made an offer.

Then came figuring out what to offer. We don't expect to steal it, but certainly don't want to overpay! We know the listing prices can be tricky.... After a little research, We got the impression the listing price was CLOSE to covering the loans, but not the other costs involved in selling. It was built in 2002 and sold for 350K then. They bought the home in 2005 for 462K, putting 20% down. Of course this was the time when prices were peaking. At some point they took out a HE loan for about 100K. Our best guess is they owe in the 455-460 range. The house was listed for 450. Tax assessed value is 458K. That is USUALLY a little lower than market value. For example, Our tax assessed value for our current home is 262K and we sold for 305K. For what it's worth, Zillow lists it's zestimate @ 400K, & Cyberhomes 392K. I don't trust these figures. It's an nice upscale neighborhood, a former "Parade of Homes" home with nice details, making it harder to gauge than just price per sq foot. It has a partial view and very nice landscape with a water feature and built-in fire pit. My agent thought if we were able to buy the home for 425-430 range, it would be a good price. We initally offered 415 asking for 7k in closing costs. They countered with 437, with the 7K. We countered back a final 425K with 7k in closing, making our true offer, 418K. THEY accepted and even opened escrow. Now it goes to the bank. They can accept more offers, and we can back out at anytime until accepted. We continue to look in case we see something else, without the hassle of short sale. It's been about 2 weeks now, the agent emailed an update that he expects a min. of 30 days to hear anything, that there are no other offers on the table as of now and to "hang in there, it will go through" Does he know something we don't or is it positive thinking?

We continue to look, even considering another one in the same neighborhood last night, it's has a good layout for our needs (better actually than the other) is larger overall, has an AMAZING view (we went at sunset and I was in a trance staring at it) but we didn't LOVE it the minute we walked through it like we did the other one, & is quite a bit more expensive. We would have to make an offer quite a bit below asking price, then probably change out the tile I hated and paint the whole place inside since the current color remind me of a cross between salmon and peach and change the island out from a multi-level (with the tallest part ALMOST as tall as me)to a one level. Other than that, I think a lot of it was decor, it seems an older lady owns it, and our taste differ and I KNOW I have a hard time seeing past that and it may be clouding my judgement.

Bottom line, we don't know if we will really know in 30 days, or if someone will swoop in and take it from us while we wait... after years of planning for a new place, and months of the hassle and disappointments of offers that never came, losing a house we planned...I don't know if I am up for more disappointment. This is the time that we are in the buyers seat in the buyers market and it is supposed to be exciting and fun! Not a waiting game.

Did anyone buy one of these in a realitively short time? Any agents with their experience?

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We purchased a short sale in 2008. We made the offer the first week in Jan heard back beginning of April. the bank countered and we accepted and closed mid-April. The owners had moved out and were divorcing and also had some other hardships. The owners have tons of paperwork and have to write a letter of hardship and have all their i's dotted and t's crossed for the bank to even look at it. Do you know if their packet has been sent? Do you know what bank they went thru? Our lender was the same one that held the mortgage which we think also helped up. They had a government loan that was guaranteed against foreclosure so that made it a little longer of a process because the banks was just leaning the new computer program for processing them. We were in a good position because we had finally sold our house and were renting so we were able to wait. Depending upon your area, houses in that price range typically have less qualified buyers so the likelihood of someone else coming in and getting the house is not good. Things are worse now than last year and at that time they were really working to try to get the process faster to get the houses off their books. If you love the house and are able to be patient and wait, you probably have a good shot. Good Luck!

    Bookmark   February 21, 2009 at 6:11PM
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Hi Janjan,

I am involved in shortsale deals all the time... both as the money guy for retail buyers like yourself, and directly as a personal real estate investor.

There's always the slim chance of a deal falling out of the sky and working just perfectly, quickly, without complication... but in my dozens of closed-deal experiences, it hasn't happened that way for me or my folks yet.

If you don't want to face a game of "wait-and-see chicken" and have a great deal of emotional anticipation building up in the shopping process... make your life easy, and don't even look at shortsales.

ELSE... prepare for the game, and be willing to play it.

Dave Donhoff
Leverage Planner

    Bookmark   February 21, 2009 at 6:17PM
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Ojoy & Dave-

Thanks for the responses.

The LA says they are waiting for the 2nd lein holder to process the package and approve. I don't know if this means the first lein holder already has, or if they are not even involved. He said it would be a minimum of 30 days as it takes them 7 days to just process the incoming fax. I know one of their banks is Home Street Bank, but I dont know if they have the 1st, or 2nd. We too have a rental home lined up. It's smaller than we are used to but has what we need so we can wait awhile, I'm just not looking forward to it. In the meantime, I hope rates stay low. We plan to continue to look at homes and if we find something else we really like, we will retract the offer and begin anew.

Dave, Thanks for the advise. I guess we knew going in this might be the case, and we liked it enough to give it a shot. Now that we've been away from it for a few weeks, I've started to feel anxious and impatient about the process. I pull up the (really bad) RE pictures to remember why we are doing it, but I can't help but hope something else tickles my fancy so we can go about this the "normal" way. I get how investors can wait it out. Chances are, they are the really good deals and if it doesnt work out, there will be another. It's not so easy (at least for me) to imagine waiting months for a response. I am really curious why they went ahead and opened escrow and the agent seems so confident that it will go through though.

    Bookmark   February 21, 2009 at 9:02PM
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