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South Lake Tahoe Short Sales: A Primer for Investors (Pt Eight)

February 28th, 2010 categories: For Buyers, For Sellers, Foreclosures, Lake Tahoe Real Estate, South Lake Tahoe Statistics, South Lake Tahoe, CA, short sales

South Lake Tahoe Short Sales: The Lender's DecisionClosing the Short Sale… the end of a sometimes epic journey.

This is the seventh in an eight-part series on short sales. Think of it as coming from the point of view of the home buyer / investor, although the short sale process is the same for the South Lake Tahoe seller as well.

The definition of a short sale is simply this: it is the sale of real property at a price that is below the amount owned on the property.

It should be noted to all potential South Lake Tahoe buyers that the short sale process varies somewhat from lender to lender, sometimes substantially; that a successful short sale purchase can be a tedious, uncertain, time consuming process. Not all offers on short sale properties meet with success, to be certain, and it is not uncommon here in South Lake Tahoe to find multiple offers on attractive, reasonably priced short sale homes.

(current South Lake Tahoe, CA short sale summary and statistics here)

Step One: The Property Evaluation (here)
Step Two: The Short Sale Application (here)
Step Three: The Hardship Letter (here)
Step Four: The Short Sale Package (here)
Step Five: The Offer and Purchase Agreement (here)
Step Six: The Lenders Decision (here)
Step Seven: The Negotiation (here)

 Part Eight : The Closing

The end result of a successful negotiation with the short sale lender is acceptance of the offer. From that to closing is not conceptually much different than closing the sale of a non-distressed property, though there can be a few out-of-the-box things to encounter.

 Title Company and Escrow :
Escrow is normally set up with a title company of a buyer's choosing, though some short sale lenders may insist on using a specific title company that is "approved" by them as a condition in their accepted contract.

Fortunately, not all short sale lenders elect to use a title company of their choice, but for those that do, the primary basis for that decision, so it seems, is the lender gets a break in the escrow fee. In other words some lenders insist on using a particular title company because it makes them more money.

When this occurs, our experience has noted a few realities in doing business with a lenders title company of choice: (1) they are usually out of area, (2) they can be exceptionally busy handling many of the lenders transactions, (3) they may not perform as fast, or as efficiently as we are accustomed, and (4) we have little leverage to do much about it.

What this means is the possibility that the buyer will have to once again exercise more patience than normal.

 Due Diligence and Home Inspections :
While in escrow, the normal due diligence period is 17 days. That is the default language in most of the real estate contracts we use, though a buyer can ask for a longer period of time for home inspections and other research on a property if they so choose. This is the same for a short sale property as well.

Some short sale contracts may contain that states that the lender is selling the property "as-is." What this means is the lender is selling the house in its present condition and that the buyer is responsible for the cost of any and all repairs, whether the are discovered in the home inspections or not.

"As-is" language can appear in the accepted contract for the sale of any property, short sale or not. But it is never binding, which means it does not preclude the buyer from asking for relief for anything he so chooses, which can certainly include repairs.

One of three outcomes will occur if a buyer asks a lender for repair relief on a home, whether as-is language is found in the contract or not: (1) the lender will pay for the repairs (usually in the form of a credit), (2) the lender will negotiate for partial payment, or (3) the lender will refuse.

If the lender's position on any requests for repairs is not acceptable to the buyer, the buyer can choose to terminate the sale.

Close a Short Sale as quickly as you can!We have not  had one of our buyers walk away from a sale over the cost of repairs that we can remember, though it can and does happen. Our counsel in general is there is almost always a way to work things out, though the particulars of which are usually specific to the unique situation at hand, rather than a general rule.

 Speed (close it quickly):

Though lenders of foreclosed and short sale properties can be slow in getting up to speed, it's our experience that they wish to move as quickly as possible once they are.

Conversely, we counsel our buyers to be patient with the lender to begin with, and to be prepared and plan on moving as quickly as possible to close the sale once it is approved and goes into escrow.

Step One: The Property Evaluation (here)
Step Two: The Short Sale Application (here)
Step Three: The Hardship Letter (here)
Step Four: The Short Sale Package (here)
Step Five: The Offer and Purchase Agreement (here)
Step Six: The Lenders Decision (here)
Step Seven: The Negotiation (here)

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This entry was posted on Sunday, February 28th, 2010 at 11:43 am and is filed under For Buyers, For Sellers, Foreclosures, Lake Tahoe Real Estate, South Lake Tahoe Statistics, South Lake Tahoe, CA, short sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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