I am about to write my first offer on a short sale property for a buyer client. I must admit I am not crazy about being on this end of the deal, since I have no control over the process and do not know the listing agent, who has yet to return my phone call from 9:00 a.m. this morning or respond to my email from 9:15 this morning.

Giving him the benefit of the doubt, here is what I have determined through the MLS...he has been in the business in this area approximately 3 1/2 years, has 6 active listings (all short sales), and 8 withdrawn/expired listings. There is no record he has sold any of his listings. He has had approximately 15 transactions on the buyer side. NOW, I realize this is possibly not the entire picture - he may have come from another market, he may have worked on a team, yada, yada, yada, however, there is also nothing to suggest he has actually successfully closed a short sale listing. I'm keeping an open mind, but am wary of how well this process is going to work since this is my first experience with a short sale and I want to be sure I know what I need to do on my side.

What questions should I be asking? How many lenders are involved? What lenders are involved? How far along in the foreclosure the sellers are? Are there questions I can ask to ascertain if he knows what he is doing?

ANYTHING you guys can suggest is greatly appreciated. Thanks!

Before you ask the listing agent questions, you should ask your buyer if he or she is prepared to wait out a long transaction if necessary. The process might drag out for many, many weeks or months.

It's hard to say if a lack of prior closings of short sales indicates any lack of qualifications on the part of a listing agent. Many of the key decisions in the short sale process are not in the listing agent's control.

Ask the listing agent if the lender has agreed in principle to a short sale at the prevailing market price; and if the lender provided the listing agent with a short sale package of documents. Ask the listing agent if he or she knows if the lender has done any BPOs on the property. Ask if the property is in default. Ask if there is a first and a second and what their balances are. (A title company might also be able to tell you.) Ask if there have been prior offers. Ask when you can expect a reply to your offer. Ask if the listed price represents the amount the lender is willing to accept to approve the short sale. (Some agents put a really low price to entice a first offer, and they will counter you later with a much higher price.)

1.What type of loan is it??

I can't believe on all of these short sale questions knowone talks about this.

This is the number one question to ask.Is it an Fha loan,a VA loan,is it a conventional loan insured or is it uninsured,is the conventional loan owned by Fannie Mae or Freddie Mac or are you dealing with a non-conforming jumbo loan.

The type of loan will determine the PROCESS and the PERCENTAGE the lender-servvicer-investor will accept.

Short sales are like regular sales some go through and some don't.

Typically in the past short sales only represented about 4 percent of a servicers workout options because of the high appreciation.Now that alot of local markets have tanked and the loans won't be through resetting until about the beginning of 2009 short sales have increased to about 15 to 20 percent of servicers workouts and some even have short sale departments now.


If it's FHA and VA an appraisal will be performed,if it's conventional an interior bpo will be performed.

Even if your buyer complies with everything on there end the deal can still be dead.

I had an instance conventional Fannie Mae backed loan.They were adament about needing 2 years tax returns which the seller did not have.The servicer then came back with needing a profit and loss to replace no tax returns.All the homeowner had was bank statements from the business.She was unemployed and the business was defunct 7 to 8 months ago.The business was only in existence for about 8 months.

The servicer wouldn't process the short sale without it and so the deal died-it happens.

There real decision is if the short sale makes sense.

What type of buyer do you have?An owner occupant,an investor to flip,or an investor to hold for a rental.

Is the property in great condition except for a few minor touchups or is it in really moderate to bad shape?

If it's in rough condition the deal will work more for an investor to flip.If it needs minimal repairs a lowball offer will be rejected and most likley you will get beat out by homebuyers who would love 10 to 15 percent equity but those numbers wouldn't work for a flipper.

If it's an investor who wants to hold for a rental you would have to make sure at the purchase price that the property could break even or cashflow based on the rents for the area as an investor loan will have a higher interest rate than a owner occupant.

This is extremely helpful, thanks.

From what I can tell, it is a conventional loan; the sales price was $365,000 and the sellers put 5% down. Prices in this particular neighborhood have gone down a little since the height of our market a couple of years ago, so right now, it would probably sell for about what they paid for it. The short sale list price is $280,000, so my first instinct is it is underpriced in order to generate interest and multiple offers.

The property is in pretty good condition and my buyer will occupy. He and his wife have a lease on an apartment until next summer, so they are not in a position where they HAVE to move, but they have the option to sublet their apt should they get this house and are in a position to settle at the bank's convenience. If the process drags on, it is not a problem for them and actually works to their advantage as they do not need the property right now but are prepared to take it if necessary.

Hopefully I can get hold of the agent and get the answers to these questions -- then I will be back! Thanks very much.

Make sure to factor in the lost equity factor in a declining market.If your area is declining 12 percent a year and the short sale takes 3 months your buyer will have lost a 3 percent equity stake based on the sales contract price signed and agreed to 3 months ago.If the buyers are in it for the long haul it won't make that big of a difference though as they will recoup that loss plus more in the market upcycle in the coming years.


If it's conventional is there one loan or two?Finding out the conforming loan limits for your area if it falls under that it's most likley a Fannie Mae or Freddie Mac owned loan.

I did find out the lender is Countrywide, who holds the 1st (with a balance of $277,000) and the 2nd (52,500). Conforming, conventional loan. The agent says they have agreed to forgive or write off the 2nd. Does this sound about right? The loan is not presently in default, but the sellers can not make the payment any longer and are being proactive.

There were 6 business cards from other agents when I went by there again this afternoon; it went on the market yesterday. Given the location and the price (which for this area is pretty amazing for this amount of space), I will be surprised if we are the only ones writing on it. My client is comfortable offering more than the list price, so we'll throw something out there and hope for the best.

Depending on how close to foreclosure the banks will wait for the highest and best offers.

The loans should be Fannie Mae or Freddie Mac backed.

The listing agent will have to get an approval from the first and the second on the offer and if there are any liens those would have to be negotiated down.If the first is made whole by the offer including arrearages and penalties then you don't need short approval on the first.

If your buyer is asking for closing costs sometimes the bank won't approve that on a short.

Countrywide has a bad record approving short sales.Let's hope you have better luck.

I've heard Countrywide isn't all that cooperative when it comes to short sales. Oh, well, we'll see what happens. In the meantime, thanks very much for all the info; it was very informative and quite helpful.

Deleted

You mean it was written by you.

Just admit it, then it doesn't look like spam, but a useful post.

Auburn CA,

i was thinking the same thing.