Friday, October 21, 2011 / by Ira Miskin
Dear Short Sale Buyer,
CONGRATULATIONS! You have just made an offer to purchase a short sale property as your next home. You've chosen to buy a home that is well worth owning, but you will need to have patience and persistence in order for this sale to be completed. Fortunately, when it is completed, you will have been able to buy a great home at a great price, one which most other buyers who do not understand the process and do not have your patience, will miss out on.
The two key words in that paragraph are understanding and patience.
Let's start with understanding. Understanding means understanding the process you are entering into. If your Realtor is an experienced Buyer's Realtor with many successful short sale closings in his or her experience in the Marietta, Roswell, Alpharetta, Woodstock or Canton communities, they will make you aware of the length of the short sale process, the inconsistencies in the level of experience of Realtors representing Sellers in the transaction and the reality that the Seller has little or no control over the sale process. That is not to say the Seller does not have all the rights accorded to Sellers in every residential re-sale transaction. They do. But the final decisions about how, when, for how much and under what terms and conditions the sale of the property can occur, lie with the Seller's Lender or in some transactions, multiple lenders. These lenders must agree to the terms and conditions of the offer as well as approve the modification of the terms of the mortgage agreement between the Seller and their Lender(s). Then, if the Seller agrees to the short sale loan modification terms and the Buyer agrees to the purchase and sale terms, the sale can successfully conclude.
What this means is a short sale is actually at least two separate transactions which are also linked to each other. Right at the start, things get confusing. The first thing a Buyer must understand is that the Seller is selling their home under duress. The Seller is being forced to sell their home because of a myriad of personal and financial difficulties. They are often extremely stressed. Under these circumstances the Seller must make an appeal to their lender to work with them to sell the home, usually at a price that is less than the Seller owes to their lender, and accept terms that allow the Seller to be relieved of most or all of the unpaid balance of the mortgage debt at the conclusion of the sale. That is not what lenders want to hear. However, as a practical matter, when all parties are realistic about the value of the property and financial circumstances of the seller, accepting a negotiated short sale can be the least financially unrewarding of several unwanted choices the lender now must make, including exercising the due on sale clause present in most mortgage documents allowing the lender to foreclose on the property. In Georgia which is a non-judicial foreclosure state, foreclosure is a relatively simple and quick process for the lender.
Lenders were, and in some cases remain unprepared for the huge number of loan modification and short sale applications they receive daily. Unlike assisting a Buyer in purchasing a foreclosed property where the sale procedures are established and, though not always easy, relatively consistent, every lender has its own sometimes clear, but often unclear or shifting short sale rules and procedures that over-complicate and muddle the process. Many lenders use third party processors to manage the transaction, some who have experienced processors and negotiators, others who do not. Many of the Seller's loans are not actually owned by the lender. These loans may have been sold to investors in a package of loans, or to Fannie Mae or Freddie Mac, the quasi-government controlled mortgage purchasers who themselves are in management and financial turmoil. FHA or the VA may be involved as well. So there are often many approvals required for the Seller to get short sale approval, and for your offer - which is only one part of the short sale transaction - to be accepted and approved by all these third parties. The process can take weeks in the hands of a Realtor and Team experienced in the management of the short sale process on behalf of sellers. But it can also take many months, only to end in failure.
All this is why the second key word - PATIENCE - is so important.
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