Things You Should Know When Buying a Short Sale
A short sale can be a way to pick up a great property at a bargain price or it might not be worth the time and trouble. New regulations, which apply to the five largest banks, make short sales quicker and somewhat more transparent.
Not every short sale is a bargain. A short sale means the seller is trying to sell the property for less than the outstanding mortgage balance. If the seller paid too much, the price could be way too high.
Widespread fraud and abuse in the field of loan servicing is finally getting some attention. As a result short sales may be speeding up. The five largest loan servicers of 49 states (Oklahoma opted out) entered into an agreement with the federal government and state attorneys general to remedy some of these abuses. As of June 1, 2012, the agreement requires the lender to respond to 90% of their borrowers’ requests for short sales within 30 days and to notify the borrower about the possible requirement of a deficiency payment. If the servicer agrees to waive the deficiency payment, it cannot sell the collection rights to a third party. Prompt notification of missing documentation is also required, discouraging the sort of deliberate delays that made short sales so difficult in the past. If the short sale is denied, the lender must give written notice of the reason for denial.
Short sales usually take longer than a conventional sale, and chances for failure are considerably higher, especially if you fail to offer the full pre-approved price. If you have a little flexibility, short sales can be a great deal. If you need a contract immediately, you should look probably look elsewhere.
Do your research before making an offer to avoid being involved in deals that don’t have much chance of being approved.
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