Hello,

I'm in the process of buying my first home which happens to be a short sale property and I need some advice from experienced people.

The sellers have already accepted my offer and their agent is writing up the Purchase and Sales agreement which will be submitted to the lender. My real estate agent told me that I need to get a home inspection before I get confirmation from the lender that they'll accept my offer. Why is this so?

Also, is there anything I should look out for in the P+S agreement? Are there closing cost expenses I am unaware of? Is there anything tricky I should look out for in the wording of this contract? Is there anything I can ask for since it is a buyer's market that would improve the deal for me?

Thank you for any input you can offer me.

Sellers accepting means NOTHING.Trust me I do short sales all the time.Until you have bank-lender-servicer approval you have nothing.

As to you other questions you are represented by an agent who should be able to answer these questions.You coming on here asking shows that you are not confident in the skills of your agent.If you don't feel comfortable talk to your agents broker for clarification.

There are hundreds of items to a short sale and they are very complex and I can't cover them here.There will be bank addendums if they approve that you have to sign.

Getting sellers approval is easy it's the bank approval that's the really hard part.Alot will depend on what type of loan is involved.

These sometimes take months and months to happen.I hope you fully understand what you are getting into.

good luck-no legal advice

Personally I would not get a home inspection until you have an accepted offer by all parties necessary to give acceptance.

Why would you want to spend the money on a home inspection for a house you may not get???

Short sales are pretty much like all others except that you have another player (the mortgage holder) in the picture.

All mortgage holders are looking at is how much money are they going to end up with; everything else is just window dressing.

It is a fairly convoluted and involved process since most mortgage holders are large banks and institutions with multiple layers of bureaucacy to pass through.

Be prepared to wait a while. Most buyers get impatient waiting for the mortgage holder to reply. I have seen it take up to 3 weeks to get an answer back. You will need patience for these deals. Most times you can get them at a good deal and it is worth the wait. Remember the seller has no say in the mortgage holder accepting an offer that is less than the mortgage owed.It is entirerly up to the mortgage holder.

I would also wait on the inspection, could be money waisted on a rejected offer.Good luck.

Western Man,

Your inspections should be done during your due diligence period. In a short sale, many times it is not clear when the due diligence period begins, either after buyer/seller acceptance or after the bank's approval. I would personally wait until you get some word back from the bank if the deal will be approved or not. Don't waste your money on something that may not happen.

Ask your agent to find out if there are other offers on the property also. The seller can accept multiple offers in some cases and send them all to the bank to try and get one approved. Make sure your offer is the only one on the table.

I have seen banks take up to 8 weeks to come back with a response. Everything in this transaction is "subject to the bank's approval". Make sure your agent stays on top of things with contacting the listing agent for updates. Many times the buyers walk away from the deal because waiting can be a hassle. You are free to continue looking for a home while you're waiting too. If you happen to find something better, then there are usually many ways to cancel the contract. Waiting too long can get in the way of you getting into something in the time period that you planned. Keep us updated. Good luck.

Thanks for all the advice. It turns out the sellers spoke to their attorney AFTER they accepted my offer and he advised them to allow the bank to foreclose on them. Can you believe that? So the bank will never even see my offer. I guess it buys them more time in the house without having to make payments since the foreclosure process takes so long.

What my realtor told me was after the P+S goes off to the bank I'll have 10 days to get the inspection done. And the bank could take 30 days or more to reply. So... she wanted me to eat the cost of the inspection which I would not have done anyways.

Oh well, the search continues.

The attorney gave them some bad advice!!!!!!!!!

The sellers could keep working the short sale and then if they sell they could say they were insolvent at the time to not have to pay any amounts on the forgiven loss.If the short sale didn't go through they would be foreclosed on anyways so it's a moot point to not try the short sale.

I sure hope this isn't a bankruptcy attorney that talks theminto filing because the attorney will make money and the house will foreclose anyways damaging the sellers credit for 7 to 10 years!!

I have talked to many attorneys before that didn't know anything about short sales and gave VERY bad advice.

Yes if it is a post-redemption state with a long period of time they could stay there rent free until the lender can evict but there are better options for them.

no legal advice

Western Man,

That advice from their attorney to just foreclose doesn't make too much sense. Proceeding with a short sale can save a bit of your credit. It doesn't look nearly as bad as a foreclosure. If you really want the home, check into this and ask your agent to try and get an explanation from the listing agent as to why their attorney told them to foreclose. Just tell them you are curious. Then let us know.

Also, if your next offer happens to be on a home that is a short sale, tell your agent that you don't want your due diligence period starting until after you get an approval from the bank. This way you will not waste any money on inspections not knowing if the bank will approve it or not.

Check to see if your agent has dealt with short sales before too. It is important to know each step in the process. They are not like any other deal.

SPAM is not tolerated here.

Don't do inspection before the offer is accepted from the lender. It could take months or sometimes the property gets foreclosed before even you have an answer. Short sale and foreclosure departments are different, so one hand does not know what the other does. And do not trust the agent that he/she has any control on the deal, because it is not true, everything depend of the bank. Good luck and be patient.

In Phoenix, we use a short sale addendum that says the clock won't start ticking on any time sensitive activities such as inspections until a written lender acceptance notice is received.

When it comes to short sales they can be anything but short. I have closed a lot of short sales over the past 2 years. Some have gone as quickly as 60 days and there is one I am working on now that has taken 10 months to get into escrow. With my short sale listings it is usually the 7th or 8th buyer that actually aquires the property. I would not waste any time or money on inspections until you have an approval letter with your buyers name on it. Be prepared though because once you get the letter you usually have 30 days to close. I know a lot of agents in my office avoid showing short sales. Good Luck!

Make sure you have your own separate agent on the next property you make an offer on. If you are buying, don't use the seller's agent.

Hello everybody, I am new here, we recently have encountered a problem with a short sale, I hope someone out there can help us out with some advice. We found a house, it was in pre forclosure, it has been on the market for a few months with no offers until us. In short...We put in a cash offer, so no other lenders or banks to deal with, the bank counter offered verbally and we accepted, so here we are thinking we are simply awaiting a closing date and they e-mail us yesterday to let us know that the mortgage company sold the mortgage, I thought they would have to let us know of any pending sales even if to another mortgage company. Will that affect our offer or will it still be upheld by the new company. what should we do now? It was my understanding that the previous owner still had a say in the sale. So it had not yet been foreclosed on. Help Please

Since we are not privy to your specific situation nobody on here can give LEGAL ADVICE.

In pre-foreclosure the bank is only holding the note on the loan the seller still owns the home. The bank just has to write off on it because they are agreeing to a loss on the note.

With these notes generally you are not talking to the investor who owns the loan,or the bank,but the entity who SERVICES the loan and is authorized to sign on behalf of the investor-bank if the offer meets certain criteria.It sounds like the loan got sold in a bulk package to another mortgage company. If that's the case it's most likely going to be serviced by a different company.

Verbal acceptance is a legal contract in Ga but is UNENFORCEABLE in a court of law so you got nothing. Thinking you have an accepted contract with a verbal response shows me you are new to short sales and the process. First thing you do before going through a bunch of negotiations is to check title for second or third mortgages,tax liens,judgements,mechanics liens etc.

Those issues will have to be dealt with ahead of time. I see many people negotiate the deal only to find a dealkiller on the title later on. Even if the investor of the loan agrees to the short sale it often sits on servicers piles of papers for months sometimes before you get written acceptance and a closing date scheduled. It just depends on the bank or servicer and the workload and workflow. The seller might still not sign off even with the bank doing so because of the conditions placed on the acceptance.

(example: the bank wants the seller to sign a promissory note saying they will be responsible for paying off the loss difference) You can try and negotiate this and some banks will give in and others won't. If I was a seller in pre-foreclosure the last thing I would agree to is carry a note for the difference.

Do you have a broker helping you with this???What county of Ga are you in???

You might like REO's better as there are more flexible on price,title is clear,and you can set up a quick closing.

yes we have a broker working with us. the house is in pike county. What is a REO? I have never heard of that. And yes the loan got sold in a bulk deal. It sounds like we either wait a little longer and see what happens with the house to try again or start looking for another one.

Pike county yes you are way on the other side of Atlanta from me I am in Cherokee county which is on the other side of Atlanta from where you are.

Are you buying this to live in or for an investment property? If for investment there are much better deals out there.

Have you ever thought about investing in commercial property?? VERY LUCRATIVE with alot of upside....

REO stands for (real estate owned) it's what the banks call there foreclosures when they take them back. See what is likely to happen is the bank will bid the property at the courthouse steps when it forecloses,if knowone wants to pay the bid price for cash which about 90 percent of the time knowone will because the equity spread isn't good enough the bank will buy the property itself. Then the bank spends about 1 month making sure title is clear and orders broker price opnions and an appraisal to set a listing price and then list it for sale with an REO agent/broker.


If you want to buy investments you need to make sure you are with someone who understands the process because it is alot different from conventional sales.

good luck

If you have cash why not buy at the steps??????

Example alot of homes have 80/20 loans on them.So if a house was bought in 2005 for say 200,000 and now is worth 220k. The owner has it listed for a short sale but knowone is buying.

There are 2 loans on the property one for 150,000 and the second loan for 50,000. After 3 years the balance on the first mortgage was 143,000 but with the homeowner behing on payments for 5 months along with attornies fees,penalties and interest the amount owed is now 153,000 on the first mortgage.

Now at the courthouse steps the second of 50,000 will be wiped out when the first forecloses so you go in and bid 153,000 cash at the steps and WIN. You now have bought a 220k house for 153k which is a good deal!

Now if you were renting this out or flipping you would probably want a bigger margin then that. This is just an example and short sales are different depending if it's an 80/20 loan,fha,va, and if there is mortgage insurance involved or not.

I think you would probably do better going the reo route or bidding on the steps since you have cash.Short sales can take months to close and I am suprised your broker has not told you this.

I agree with super realtor, you can find great deals through REOs. But one thing I want to add, there's always reasons why properties do not sell in foreclosure. Many of the REO properties are damaged, even if it's not superficial, there may be mole problems, piping problems, etc. Issues that may cost you more than the property is worth.

I personally think REO investing should be left to the professionals who can spot the problems and have plenty of capital for reserve.

I'm an analyst on Wall Street that specifically deal with distressed assets, I've seen too many drive-by BPOs that just completely inaccurate due to issues inside the house.

Just my 2c
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