Home After Home

How does buying a "short sale" affect the buyer?  So many buyers are asking this question and it’s a good one.  Sometimes us REALTORS sound like we are speaking a foreign language.  We talk about ARM’s, Buy Downs, BPO’s, CMA’s, Negative Am, and so on.  It’s worth explaining rather than using our “industry dialect”
Lets first talk about “short sales” and how it affects buyers.  A short sale is simply a transfer of ownership with the seller’s lender agreeing to accept less then the total amount owed on the seller’s loan or loans.  All of the seller’s loans on the property must be paid or satisfied by the banks in order to convey a “clean” title to the buyer.   There are situations when the proceeds of the sale will not satisfy the seller’s payoff.  So the seller is “short”, thus a “short sale”.  For any buyer purchasing such a property it can be a blessing in disguise.

 
● GETTING GOOD VALUE - The buyer is likely to get these properties below appraised value.  Ultimately the bank has the final say on all the terms of the agreement. 

● BEING PREPARED - The sales process takes longer then traditional sales.   Since there is one more person involved, obtaining an accepted sales agreement takes longer.  In light of the fact that many lenders across the nation are flooded with Short Sales and Foreclosures, the one property that you are buying is of little priority to the bank.  It is only one drop in the bucket that is already full to the rim.   We sometimes wait weeks or even months to get a response from a bank on an offer on a property.

● ACCEPTED AGREEMENT - Once the bank agrees, the buyer then proceeds with the terms of the agreement just as they would with any other sale.   Inspections, appraisal, and all the usual details spelled out in the sales agreement.  Keep in mind, the property may or may not have utilities turned on.  Many times the buyer will turn on the utilities in order to do inspections.  In some cases, the buyer is so thrilled with the terms of the sale they may elect not to have utilities turned on for inspections.  This is on a case by case basis to the satisfaction of the buyer and in compliance with the terms of the agreement.   In most cases, the buyer will be purchasing the property in its “as is” condition.  Expect no repairs to be done by the seller or the bank.  This is one reason the buyer will get a good value.   The bank will have their process.  After receiving a complete package from the listing agent and the seller, it is highly likely the bank will order a Broker’s Price Opinion (BPO) or an Appraisal.  Then the bank will present to their investor for approval of the contract.  This all sounds easy, but is a time consuming process that can take weeks or even months.  When the REALTOR tells you the property has been assigned to a short sale negotiator, then the ball will begin rolling.  Until then, time is frozen, and no progress occurs.  Having successfully closed many short sales in Baton Rouge, La, I have learned to teach agents and buyers to expect enormous delays in the process. Remember “patience is a virtue”.

● CLOSING THE SALE - The bank must also approve the final sales documents before the closing takes place.  Primarily they are interested in approving the HUD which is a statement showing the details of all money involved in the transaction.  Since it’s a short sale, they definitely do not want to see any proceeds going to the seller.  Will the buyer be faced with any unusual title issues?  As long as a reputable closing agent does their job, the answer is no.  One of the jobs of the closing agent is to verify that the title conveyed is clean with no liens or encumbrances.  The buyer can also buy an owner’s title insurance policy from the closing agent.  So when you accept the keys to your home at the act of sale, you can feel good about your home.

● HOME OWNERSHIP - It’s been said that the misfortune of one can be the fortune of another.  This can be true to buyers who are buying such properties.  Just remember, your penance is weathering the time factor and remaining patient.   This is can prove to be money in the bank for you.   Happy house hunting!

If you are in the market to purchase a home, this blog post will help you as you prepare on your journey to make that move.  This is a step by step checklist to help you.

1. Start looking online. Ah, but what are you looking for? Well, you want to look at houses in the areas that you think would be of interst to you.  Pick out a few different neighborhoods that you might want to drive through.  And start to get a feel for what a dollar will buy you in certain neighborhoods.  If you are moving in the Baton Rouge market, it may be helpful for you to know, that even in "this" economy, homes sell very near the asking price. In fact, on average, Baton Rouge area homes are selling just under 97% of the list price.  What exactly does that mean for you? Well, if you are looking to spend no more than $200,000, you should be looking up to $206,000 but not looking at $225,000 or $250,000.  Sellers just aren't coming off their prices by large margins. So, look at homes that are priced very close to your price range. 

The second thing you are looking for online is the realtor.  What realtor might you want to work with?  Who's sites do you like? You might even want to read up on the realtor, their designations, qualifications, experience, and work practices.  This will give you a jump start on who you want to interview to be your agent.  Yes, I said "interview".  We're going to talk a little more about this later, but for now, remember that "who" you choose to represent you is one of your most important first steps.

Here's a website to use to start looking for homes: www.HomeAfterHome.com.

2. Start talking to lenders. This is where we start to part from your online research.  It's always best to deal with a local lender.  So, start with the bank where you have your checking/savings accounts. Ask to speak with a loan officer and let them know that you intend to purchase a home. Tell them that you would like them to pull a credit report, qualify you, and provide you with a good faith estimate.  The credit report now, will give you a chance to catch any errors that may be on your report that would inhibit you from buying a home.  Having them qualify you will put you at ease and give you some comfort with the price range.  And having the costs (the good faith estimate) will help you to prepare for the normal buyer costs (in addition to the downpayment) that you will have associated with your loan and closing.  This step is all about preventing you from having unwanted surprises when your time might be more critical.  During the home buying process there are many deadlines to meet to stay in compliance with your contract, so having those unwanted surprises can throw everything off for you and make it much more stressful.  You probably want to talk with and compare 1-3 lenders.

Note: If you are paying cash for your home, prepare by obtaining a letter from your bank stating that you the appropriate sum of money as available cash on hand.  This will serve as proof to the seller that you are "for real".  You might think that it's everybody's dream to have a cash buyer, but I have seen both agents and sellers become uncertain or doubtful when they have a cash buyer.  So have that letter on bank letterhead or letterhead from your financial planner.  If you are paying cash, we want to make sure that the other side of the table understands that you really do have the cash, have access to the cash, and are much better for them than a financed buyer.

3. Drive around. Now it's time to go ahead and drive through the areas.  Check out which areas you might like to live in.  Make the drive from work to a potential neighborhood at "quitting time" to see what kind of traffic you can expect to endure in different areas.  Visit neighborhoods you've never been in.  See what you like/don't like and make a list of any for sale by owner properties that you find in the areas that you like.

4. Interview REALTORS. I mentioned that we would come back to this. At this point it's time to get started with an agent.  You've figured out what areas you like. You have begun the financing process. And you may even have found a few houses that you would like to see.  Now is a great time to check out which realtor is best suited to meet your needs.  In selecting a realtor, many people pick one that they like or a friend or family member.  That's fine, but check their credentials.  This is a big purchase, and selecting the right REALTOR now can go a long way to you in the future.  You need someone who see's hundreds of homes, knows the real estate market, understands the data, and has great negotiation skills.  It's not just about finding a home.  A good agent will help you save thousands.  These thousands are saved by helping you select the right home, negotiating the right price, negotiating repairs with the seller, and helping you get to a sucessful closing.

Once you select a REALTOR, they'll help you select homes to view and you'll move on to the next step.

5. Viewing Homes. Now you'll get to go out with your agent and see your top picks.

6. Everything Else. The rest of the process of buying a home will be managed by your agent.  In a nutshell, once you select a home, your agent will help you negotiate a purchase agreement.  Next up, is to secure your financing and conduct inspections.  Next, you may need to get insurance in place and coordinate a closing appointment.

The Everything Else section is where most deals fall apart. The home buying process gets more complicated throughout the "under contract" time period and having an expert help you will make things go more smoothly.  Understand that step 6 doesn't have to be stressful.  It can be, but having professional help will minimize that stress.

Contact me if you would like help getting started. I can help point you in the right direction and, when you are ready, I would like to interview to be your agent.  Put me to the test!  Just call 225-341-BRLA and we'll help you get started.