The murky world of short sales

conchitaFLAugust 29, 2012

Some of you may remember that I've been considering buying a townhouse for a while now. The thing is that with the govt pushing foreclosures into investment bundles, the only lower priced properties in our area that aren't in the midst of a mini bubble right now are short sales. There's one unit I would buy if I could get it at a reasonable price (a gut, and I would only be willing to pay accordingly).

However, like everyone else I've shunned short sales in the past. For one thing, they hardly ever seem to close. The complex where I'm interested has had probably 18 or 20 short sales (out of 400 units, so it's not foreclosure city or anything) listed in the past year and only two have actually closed.

I'm in a position where I could certainly wait one out as long as it takes (my landlord doesn't want to lose me as a tenant and I could certainly stay here 9 months or a year or even longer if necessary). Our mail carrier actually did manage to purchase a short sale apt in another development and it took him about a year and a half start to finish.

Does anyone have any particular suggestions for how to go about this? I'm aware that I need to check on back association fees and such, but what else? Taxes are paid except for a sewer assessment, but that's not much.

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brickeyee

Check complex financials VERY carefully.
The foreclosed units are unlikely to have paid all their fees, especially if a short sale was involved.

The number of foreclosures, and a possibly high number of rented units can prevent some loans.

Find a good RE attorney to help you.

    Bookmark   August 30, 2012 at 3:37PM
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conchitaFL

Thanks, brickeyee. Around here, once in foreclosure there's usually some agreement with the HOA that lets the new buyer off the hook for old association fees. Short sales don't have that, and I've taken that into account.

I'm paying cash, so loan considerations don't come into play, but foreclosures in this development have averaged a little under 4% of total units so far, so not too bad.

However, I think I'm up against one of my main reasons for shunning short sales in the past. The unit I was considering is owned by a couple in their 80s who evidently bought it for their druggie son who no longer needs it because the state is currently providing accommodation for him (attempt to acquire a controlled substance by fraud) and got in over their heads raising money for his legal fees.

I have a hard time lowballing people in that situation. Banks, yes, gleefully, but regular folks, not so much. But the asking price is too high. Sigh.

    Bookmark   August 30, 2012 at 5:09PM
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ncrealestateguy

I would be asking myself why all of the short sales are not selling. Around here, buyers love short sales.

    Bookmark   August 31, 2012 at 7:59AM
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conchitaFL

Oh, I don't think there's too much mystery there. Most of them go under contract, but prior to the bundling thing there was always a foreclosure that would come along that you could have NOW, and a lot of people bid on a short sale then went for a quick purchase instead during the wait time.

At the moment, for instance, there are three short sales in there: the one I mentioned, one that is a lis pendens so obviously nobody will touch it, and one that is both a mess (occupied by a someone who has way too much stuff) and priced above the market price for a fully renovated unit although it's all original and in bad condition.

    Bookmark   August 31, 2012 at 10:59AM
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brickeyee

"I would be asking myself why all of the short sales are not selling."

Most likely they are still overpriced.

Lenders HATE losing money.

    Bookmark   August 31, 2012 at 1:18PM
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barbcollins

"Most likely they are still overpriced.

Lenders HATE losing money."

But they are VERY good at it.

    Bookmark   August 31, 2012 at 8:28PM
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brickeyee

"But they are VERY good at it. "

Not al that good.

The default rate on mortgages was very small and they represented a low risk to lenders until pressure was put on them to lower the standards for lending and make more higher risk loans.

It then blew up.
Folks with poor credit got that way for a reason, they are high risk borrowers.

    Bookmark   September 1, 2012 at 8:35AM
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ncrealestateguy

Maybe they are falling out of contract because the buyer's lenders are finding out that there are too many rentals in the complex or that the HOA dues collections are too far behind. Most lenders are checking these stats out before closing on a condo deal.
Other than that, why not make an offer? I have not heard of a short sale taking that long (more than a year) to close recently. They really have gotten more streamlined over the last couple of years.

    Bookmark   September 1, 2012 at 9:05PM
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pudgeder

I have no advice for buying a short sale, but I DO for buying property where a known druggie lived.

Friend of mine -- her sister allowed her brother to live with her for a short period of time. During that time he lived IN HER HOUSE, he bought/sold/used drugs. He moved out, got clean and moved on.

However, his "reputation" did NOT LEAVE that house.
Someone came looking for him more than 2 years after he'd moved out. That person murdered the sister and her 5 year old son.

I would think long and hard before I purchased a home where any known drug activity occurred.

    Bookmark   September 1, 2012 at 9:35PM
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conchitaFL

Thanks, pudgeder. Yes, i know and agree. My next door neighbor allowed her son the druggie to stay with her for a few weeks while he was between sentences about five years ago, and we still get some scary people looking for him from time to time. (One of my reasons for wanting to move from here.)

    Bookmark   September 1, 2012 at 10:13PM
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