Short Sale Questions -- Advice Needed

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Education & Training with 123 ConEd LLC -- Michigan real estate continuing education

short sale

I’m hoping that the collective wisdom of all of the experienced people here can help me. I'm a licensed broker in Michigan, but I don't know much (almost nothing) about short sales.

My wife and I are strongly thinking about buying a bigger house in our same neighborhood (located in Farmington Hills, Michigan). We looked at four houses, including one that is a short sale. We really like the short sale house.  There is already one offer on the short sale house, but the selling agent said that the bank is still entertaining offers.

I very little about short sales, so I have several questions. Can anyone help?

  • Do banks in short sale situations look more favorably on a 100% cash offer as opposed to financing? I’m wondering whether my offer would be looked at more favorably if my offer was all cash.  I'd like to make my offer look more favorable than the other offer.
  • Do I need to put an earnest money deposit down with my offer or can I say that I’ll put my earnest money down upon acceptance? If so, would it help to offer a large earnest money deposit upon acceptance to get the bank’s attention? I’d hate to have a large earnest money deposit tied up for months while the short sale slowly works its way through the bank before the bank accepts the offer.  I don't mind putting down the money once the offer is accepted.  Any thoughts?
  • I’ve heard that some homeowners in short sale transactions strip their homes before they vacate and take everything from appliances to door knobs to cabinets to toilets, etc. Is there any way to protect myself from that happening in the purchase agreement? Does anyone have any recommended language?
  • There were a few pieces of furniture that are in the house that seemed to fit certain rooms very well (e.g., a beautiful desk in the office). Is there a way to put that in the purchase agreement or would I need to negotiate separately with the current owner?  I'm not sure about this in a short sale situation.
  • Is there any disadvantage to buying a home through a short sale?

Any thoughts or comments would be much appreciated!!!! Thank you!!

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Ambassador
2,392,150
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

My goodness Jason.  Haven't you yet engaged an experienced Buyer's Agent?????

Mar 14, 2011 07:47 PM #1
Rainer
131,895
Gloria Commiso
Keller Williams - Hermosa Beach, CA
Hermosa Beach

Cash is generally more favorable but some banks will take a chance for a higher net w a 20% or 30% higher offer.

Ask your agents the earnest money (EM )question. I generally wouldnt advise a large earnest money deposit....you are safer agreeing to increase the EM at acceptance.

There really is no telling what condition the home will be left in....however banks are starting to insist the property be left in a reasonbale condiiton if its a HAFA short sale. (ask your agent to ask the lisitng agent)

You can ask for the furniture and they will counter it out if they dont agree.

The biggest disadvantage is the waiting (who knows how long it will take) and the uncertainity of condiiton and monetary issues that pop up on the title and may be brought into the negotiation in the eleventh hour, like tax liens, mechanic liens etc. Banks may ask for more money in order to close.

Be advised if you are using CASH you may tie up your cash for up to 180 days (banks wont refi in less time in California) check w a reputable lender for information in your state. If the property is left in poor condition you may want your cash to fix up the house.

Biggest disadvantage, if you end up financing a short sale you wont know where the rate will be by the time the short sale is approved.

good luck

Mar 14, 2011 07:53 PM #2
Rainmaker
178,278
Jason Rose
123 ConEd LLC -- Michigan real estate continuing education - Farmington Hills, MI
www.123ConEd.com

Hi Lenn.  Thanks for your comment.  I have not engaged a buyer's agent because I'm a licensed broker in Michigan and wanted to reclaim the buyer-side commission, which will be pretty substantial.  I know there are great benefits to engaging an experienced agent, but I am hoping to do it myself even though I'm not familiar with short sales.  I'm not even sure that the short sale house is the one we want, even though we're leaning that way.  I just wanted to get a little background. 

Mar 14, 2011 07:53 PM #3
Rainmaker
178,278
Jason Rose
123 ConEd LLC -- Michigan real estate continuing education - Farmington Hills, MI
www.123ConEd.com

Gloria:  Thanks so much for your helpful thoughts.  I really appreciate your time!

Mar 14, 2011 07:55 PM #4
Rainmaker
407,620
Karen Monsour
Coldwell Banker Fort Lauderdale Beach - Fort Lauderdale, FL
REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert!

Jason,

I agree with Lenn, you need to get an experienced short sale agent from a reputable firm to help you.

One suggestion I do have though, do NOT put down a large "escrow" deposit. Most people in Florida only put down $1,000. and then put another $2-3K after the offer is accepted.

Let me give you a scenario (then you'll know why you do not offer full price on a short sale unless you have a seasoned agent - YOU TRUST - that knows there are truely multiple offers - usually on short sales, one offer is presented at a time - not multiple offers as the owner has to agree to your terms prior to getting 3rd party approval).  Example:  I showed a customer a property that was listed as a short sale for $1,000,000.00.  My buyer offered $600,000.00 cash and after the short sale process was complete found himself still with that $400,000.00.

You could look on here for the state of Michigan and find an agent in your area.

Missy Caulk lives there as do Bob Stewart (AR guru) and his wife - they certainly should be able to guide you in the right direction.

Mar 14, 2011 07:58 PM #5
Rainmaker
178,278
Jason Rose
123 ConEd LLC -- Michigan real estate continuing education - Farmington Hills, MI
www.123ConEd.com

Karen:  Thanks for the advice, especially on the escrow amount question.  I'm going to look into an experienced, trusted short sale agent if we decide to make an offer on the short sale house.  I know what I don't know, which is short sales, and I don't like making mistakes. 

Mar 14, 2011 08:20 PM #6
Rainer
172,169
Dave Sullivan
www.TheCreditGuy.TV - Birmingham, MI
The Real Story on Your Credit Score - TheCreditGuy

Excellent information I will forward it if that is ok? thank you!!!

Nov 05, 2012 12:37 PM #7
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Rainmaker
178,278

Jason Rose

www.123ConEd.com
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