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Buying A Foreclosure (Bank Or Government Owned) Or Short Sale Listing

Foreclosures and short sales have both become very common in our current market. I will humbly attempt to define and explain the procedures for each of these.

Let's start with foreclosures. A foreclosed home is a bank owned home. Also known as an REO listing. In Southeast Michigan, these homes are typically listed with a Realtor and listed in the MLS (multiple listing service). The multiple listing service I belong to requires the listing agent to disclose bank owned homes in a searchable field, making it easy for buyers' agents to search solely for foreclosures. By the time the bank lists the house, they typically have cleared the title and it's just a matter of negotiating price and terms with a buyer, clearing any buyer contingencies, and proceeding to closing just like any privately owned home. Depending on the bank that owns the house, a buyer can expect an answer to their offer within a couple days. There are a few banks that sit on the offers for a couple weeks, but that is not the norm. And some of those banks require a pre-approval with them before they will even look at your offer. Sometimes the buyer is required to have the utilities turned on in their own name in order to perform their home inspection. But I have noticed more banks leaving the utilities on while the house is listed. The only other real differences are the bank addendums you will be required to sign - pages and pages of rear covering for the bank. And you will more than likely get a special warranty deed as opposed to a warranty deed in a normal sale.

Government owned homes (HUD, Fannie Mae, etc) are also foreclosed homes.

Buying a Foreclosure

Short sales are a different animal indeed. A short sale is when the house is offered for sale by the owner (person as opposed to a bank) who owes more than what is owed. Once an offer is accepted, the bank has to agree to reduce the mortgage payoff. Usually some of the leg work has been done before the house ever hits the market, but there's only so much that can be done prior to getting an offer. I have had answers back on short sale offers as quickly as a few days (this is VERY rare), but typically it takes 3-6 months to get an answer back on an offer, and sometimes that answer is just "no" with no counter.

If you need to get into something right away, looking at short sale listings is probably a bad idea. If you have time (and patience) you can usually get a pretty good deal on a short sale listing. It benefits the bank to take their loss now rather than wait and incur the costs of foreclosing. Short sale is also a searchable field in the multiple listing service I belong to. Short sale listings can be searched or excluded from searches.

Short Sale Blog Posts

For more information about buying a foreclosure listing or short sale listing, please don't hesitate to call or email me anytime.

Jackie Hawley
Cell: (248) 736-6407
Jackie@JackieHawley.com

Buying an Oakland County MI Short Sale Listing- What to Expect

Between what I’ve heard on TV and radio, read and from conversations I’ve had with clients, potential clients, other agents, relatives, friends… I have learned that there are a whole host of definitions for the term “short sale.” And most of them not very accurate.

A short sale is when the house is offered for sale by the owner (person as opposed to a bank) who owes more than what the house is worth and can’t, or isn’t willing to, pay the difference themselves. Any offer that home owner would accept would be subject to the bank agreeing to reduce the mortgage payoff. Selling short. Short sale.

Short sale listings can be some of the best bargains available in Oakland County Michigan, but there are things about short sales that the Oakland County Michigan home buyer should be aware of prior to even looking at houses.

• Be prepared to wait 3-6 months (sometimes longer) for short sale approval
• Be aware the lien holders may not agree to the payoff required to proceed with your offer. After 3-6+ months your offer may be countered or outright rejected
• Don’t expect appliances to stay
• Don’t expect the seller to pay for repairs
• Don’t expect your closing costs to be covered in the form of seller concessions- sometimes they’re capped at 3% and sometimes they won’t be covered at all
• DO expect to close pretty quickly once the short sale is approved

One of the first things everybody involved in a short sale needs to understand is that the banks are under no obligation to approve a short sale. You would think it would be in the banks best interest to approve a short sale when the offer is reasonable, but often times the actions of many of these banks seem to defy logic. Also, the more lien holders involved in the transaction the more difficult it is to complete and the higher the probability that it won’t close.

Buyers need to realize that there are factors beyond the control of the buyer or buyer’s agent.

• We can’t control how cooperative the seller will be with the bank’s demands
• We can’t control how knowledgeable or diligent the listing agent is
• We don’t know from day-to-day what financial incentives the government will offer the banks which can determine what short sales they approve
• When there are multiple mortgages we don’t know how well the negotiators for the first and the second will play together or the abilities of the listing agent to ref them
• The seller can also reject the terms of the short sale which will be addressed in detail in another article

In a nut shell- short sales can be a good bargain but for the right buyer. You need to have the patience of a saint and the ability to move on someone else’s schedule.

Jackie Hawley
Cell: (248) 736-6407
Jackie@JackieHawley.com

Short Sales Are NOT Worked Out Before Listing the House

If you are buying a home in North Oakland County or Lapeer County MI you are probably seeing a lot of houses offered as a short sale. A short sale is when the seller owes more than they can sell for and are asking the bank(s) to reduce their mortgage payoff.

Unlike a mortgage pre-approval there is no short sale pre-approval. The asking price you see on a short sale listing is a price the seller and his agent came up with. If the agent is a good agent it should be a price the lender will accept if they approve the short sale. The lender will have the house appraised or order a BPO (broker price opinion) before approving a reduced mortgage payoff. If the appraisal comes back at $200,000 the lender will not approve a short sale with a $100,000 sale price. Recently we had a lender counter a short sale price by $50,000- AFTER a 5 month wait.

The 2 main things to remember when considering a short sale listing:

1. The lien holder does NOT have to approve the short sale
2. And if they do they approve the short sale theymay not approve at or below the asking price

If you are considering purchasing a home in North Oakland or Lapeer County MI, please contact me.

Jackie Hawley
Cell: (248) 736-6407
Jackie@JackieHawley.com

CCS = SALE PENDING

Tired of calling your agent with homes you find on Realtor.com or on your agent's IDX site (consumer MLS) only to be told that many of those homes are pending? And many of those same homes arestill showing as active a month or two or six later? I would be frustrated and start to wonder ifMY agent was lying to me. I would start to wonder if MY agent had another reason for not wanting to even SHOW me those homes.

CCS = SALE PENDING

Your agent isn't lying. The CCS status is an ACTIVE status and is highly misused. CCS was originally for homes that had an accepted offer subject to the sale of another house. We called that a 72 hour contingency clause, and basically the seller would keep their home on the market and if another acceptable offer came in the first buyer had 72 hours to remove their contingency and go through with the sale (prove sale of their own home or buy without selling) OR back out and the seller would proceed with the second offer.

Fast forward to the day of the short sale!"Short sale" is simply another contingency in an offer to purchase. It is a seller contingency and is no different than a buyer contingency of mortgage approval or satisfactory home inspection. It IS a contingency that normally takes longer to satisfy than other "normal" contingencies. The sale is contingent on the seller obtaining a reduced mortgage payoff from their lien holder(s)- reduced enough to accommodate the offer price in the offer to purchase.

CCS = SALE PENDING

At this point a listing agent often changes the listing status to CCS - contingent continue to show. Let me be absolutely clear at this point:

• The buyer and seller have a fully executed purchase agreement.
• That purchase agreement contains contingencies just like every other fully executed purchase agreement
• One of those contingencies is a short sale contingency which can take several months to satisfy

I don't know whya listing agent would still leave the listing with an active status (CCS is an active status). Does that agent REALLY think buyers will be lining up to place back up offers on a pending home? Are the current buyers so flighty they may walk and lose their earnest money? Or is the original offer so poorly written that the buyer IS ABLE to walk without consequences? Or possibly the listing agent wants to keep the listing with an active status to pick up buyer leads? CCS in the MLS still sends our listings to Realtor.com, MoveInMichigan.com, etc. Or maybe this is just becoming such a common practice that most agents don't even think and automatically mark their pending short sale listings CCS.

Whatever the reasons:

CCS = SALE PENDING

Jackie Hawley
Cell: (248) 736-6407
Jackie@JackieHawley.com

What is a Redemption Period?

In Michigan, once you get behind enough on yourhouse payments for the bank to take action (usually after a few months- sometimes longer) you will receive a notice of foreclosure. On that notice there will be a date for the sheriff's sale. That usually takes place within 30 days for so of the notice of foreclosure.

At the sheriff's sale the house is usually "bought" by the primary lien holder. Sometimes they purchase it for the amount of the mortgage. Sometimes they pay closer to fair market value. The home owner then has a period of time to "redeem" the house (pay off the mortgages)-thus redemption period!

In Michigan the redemption period is 6 months if the house is on less than 3 acres and12 months if the house is on 3 or more acres.

This is importantif you arelooking at a house offered for sale with a short sale contingency. If the house is on less than 3 acres and the sheriff's sale was 5 months earlier, there is a very good chance the seller won't get a short sale approved in that 30 day time frame. Yet another reason to use an experienced, full time agent to represent you when buying a house in Southeast Michigan.

Jackie Hawley
Cell: (248) 736-6407
Jackie@JackieHawley.com