For sellers who have considered their options and are choosing to pursue a short sale, many questions remain.

Why would a lender agree to a short sale?

Many factors affect a lender’s decision to agree to a short sale.  Foreclosures take time and are rather expensive.  A short sale on a property may make better business sense to a lender.  Also, federal and state governments have been urging a reduction in foreclosures which makes short sales a preferred alternative in some instances.  Remember, short sales are not automatic and are decided upon on a case-by-case basis.

One thing is for sure.  If a foreclosure has already occurred on a property, a short sale is no longer an option.

Once a seller decides on a short sale, engaging the right professionals is the next step.  Sellers should locate real estate professionals who have training and a track record with short sales.  As with any professional relationship, sellers should beware of those who offer to take control and easily get them through the process.  It is complicated and takes time and expertise to succeed at short sale transactions.

Sellers may also need to consult with an attorney or tax professional at various times during the negotiation and before the final agreement with the lender.  Realtors® are not accountants or attorneys.

Finally, sellers need to prepare to disclose their whole financial picture to their real estate professionals and to their lender(s).  They will be providing a hardship letter in some instances as well as financial documents, pay stubs, tax returns if self-employed and any relevant details regarding their current financial situation.

What if there is a second mortgage or home equity line against the property?

Shorts sales are still possible.  The second lien holder should be notified at the same time as the principal lien holder because all lien holders will be involved in the negotiation and will require the same information from the seller.  It makes sense to work with all of them together at the same time.  If there is mortgage insurance on the property, they, too, will need to be notified. A well-trained, experienced Coldwell Banker agent can help organize all these details.

Read the full series at www.SDViewOnline.com right now.

Distressed properties can provide buyers with amazing opportunities to own homes that were once out of their reach.  However, many buyers are finding these transactions frustrating.

What should you, as a buyer, know about foreclosures and short sales?

Foreclosures are often referred to as REO’s, an acronym for the technical term Real Estate Owned.  These properties are now owned by the bank or lender who foreclosed.  A short sale occurs when a seller liquidates a property for less than is owed on the property and the bank or lender approves a sale short of the total amount owed.

REO’s often provide for quicker escrows, but some lenders are now asking for cash-only buyers which limits a buyer’s ability to compete with investors and groups of investors who are buying many foreclosed homes presently.  Since most buyers need financing to purchase a home, foreclosures might not be the best option for them.

In short sales, the homeowner still determines price and terms and approves offers, but the lender(s) have final approval authority over price, terms and conditions.  There are many items to negotiate and this can take up to six (6) months or longer in some cases.  Being a successful buyer on a short sale takes patience and a trained, knowledgeable real estate professional.    While there are no standards throughout the banking industry for negotiating these offers, some lenders are currently working on streamlining the process to shorten the time required for answering a buyer’s offer.

Also, buyers should be prepared to provide proof of down payment and credit worthiness at the time the offer is submitted.  If possible, it helps to be flexible with closing dates since lenders often favor quick closes after the short sale is approved.

How can you find a qualified real estate professional?

You may have a close friend or relative in real estate, but if that person does not know anything about short sales, working with him or her may hurt your chances of a successful closing.  Choose your representative carefully.  A qualified Realtor® will be able to show you short sale listings, help negotiate the purchase when you find the right property, and ensure smooth communications with the seller’s representative.  Not every short sale request is approved by the lender.  Working with a knowledgeable professional familiar with the process and possessing the necessary tools to properly package and present your offer will increase your chances of success.  Be sure your Realtor® uses the standard forms approved by the State Realtor® Trade Organization.

Read the full series at www.SDViewOnline.com right now.