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What is the process of purchase on short sale after signed agreement.

My offer via real estate agent  on short sale property (condo) has been accepted. I have mortgage preapproval. Credit Score 810. I am going to pay 20% down payment.

What is the process after I have the signed agreement?
  • January 02 2014 - Woodbridge Township
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Answers (3)

Sanjiv,

If you have your own real estate agent, you should be asking them.  If you made an offer directly to the listing agent, then, you need to get your own agent, or, start asking a lot of questions of the listing agent.  Ask the same questions weekly, to make sure the answers stay correct.  The listing agent, should have provided you with a cover sheet about agency relationships.  If you did not get it, then you have reason to walk.  It's state law to provide this information to you before the agent asks you to sign anything and/or deal with the agent. This would give you an opportune moment to fix your offer, if need be.

If your question pertains to after the bank has approved the deal, then, you are in a simple purchase mode.  You'll likely close within 45 days.  If you are only accepted by the seller, then, you only have 2/3rds of the contract.  Depending on how it's worded, you should have exit clauses should you wish to walk away for a better deal. 

The info posted so far are more common worse case scenarios.  The rep who handles the short sale with the bank, will have a lot to do with if it falls apart.  I've personally had clients do everything right and the seller's attorney was handling the short sale and botched the whole thing, and after the buyer spent $1500 in fees for mortgage, appraisal, inspections, and 6 months time.

Find out who the lender is.  Are there more than one? More lenders require more time and possible roadblocks.  Small local banks tend to be quicker and easier to deal with.  I've know short sales to move from original offer to approval to close, within 65 days.  Largest lenders, as long as 1 year plus, before dying.
  • January 03 2014
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Profile picture for Peter J Rogers
can't argue anything in the previous answer so a couple of amplifying observations. Despite the fact that short sales have been around for a while the banks do not seem to have figured it out. To a certain extent this is a result of the listing agent failing to interact with the bank. We are taught to liaise directly with the bank and discuss with them the price they are willing to accept in short sale but too often the listing agent fails to  do that so you get a situation where the owner signs a contract but the bank refuses to accept it.
The result is that everything stalls.
Secondly in New Jersey if the short sale fails to go through and foreclosure proceedings are initiated it can take upwards of 2 years for the process to go through and for the property to come back on the market as a foreclosure.
So if you add a year of short sale proceedings the result can be at least 3 years between the time that the owner has decided they cannot afford to pay for the home and the day that the Sheriff knocks on the door. Very tempting for some people to live rent free for 3 years 
  • January 03 2014
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Profile picture for Outer Banks N C
It was accepted by the seller. The seller is losing his condo and not making a dime on it and might actually still have to pay after it's sold (that is another story) so the seller would sign almost anything to get the ball rolling at this point.

Now the offer, accepted by the seller, is sent to the bank for their approval since there will not be enough proceeds to pay off the loan in full at the closing. So the bank must agree to lose money to allow the deal to go through. Their options are:

1. foreclose on the house which can take a year
2. allow the sale at some price
3. discuss allowing the sale, discuss what price it should sell for after a couple appraisals or BPO's are done to determine the current market value.

They will pick #3 if this is the first offer to start the ball rolling. Many short sale buyers give up and walk away because it can take 1-3 months to get an answer from the bank on this offer. The next buyer can move into a long process that has been cut shorter because someone else already go the bank moving and the ball rolling.

And the price you agreed to is not the price it will sell for, so be ready for a counter offer that's more from the bank when ever you hear from them.

Enjoy short sales !!


Tim
  • January 03 2014
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